AirAsia Group Bhd
(Oct 29, RM2.38)
Maintain buy with an unchanged target price of RM3.62: AirAsia Group Bhd’s third quarter of financial year 2018 (3QFY18) average seat kilometre (ASK) grew 10% year-on-year (y-o-y). In 3QFY18, AirAsia’s consolidated air operator’s certificate (AOC) (Malaysia, Indonesia and the Philippines) ASK increased by 10% y-o-y to 16.45 billion. In line with capacity expansion; the AOC continued its good run with a revenue passenger kilometre (RPK) growth of 5% y-o-y to 13.57 billion.
A net addition of aircraft led to growth. Its fleet size saw an addition of 17 new aircraft from 3QFY17 to 127. In comparison to the previous quarter, AirAsia’s AOC expanded its fleet by three aircraft in 3QFY18. Meanwhile, there were three new routes introduced under the AOC, two in Malaysia and one in the Philippines.
The AOC’s load factor remained healthy at 82%. Despite the backdrop of faster ASK expansion compared to an expansion in RPK, the load factor in 2QFY18 remained healthy at 82%. Moving forward, we believe that the seasonal strength in 4QFY18 could further support growth in ASK.
Thai AirAsia (TAA) stayed resilient, with a load factor of 81% in 3QFY18. TAA’s ASK increased 8% y-o-y as it operated six more aircraft, enlarging its fleet size to 60 aircraft. This was in comparison to the same period last year. During the quarter, total passengers carried by TAA increased by 4% y-o-y to 5.1 million passengers, on the back of a 9% y-o-y increase in capacity.
The group’s operational numbers in 3QFY18 remained rather resilient in the wake of volatility in fuel prices. Its load factor continued to be healthy, supported by a continuous rise in RPK. Given these stable indicators, our positive outlook for the group stays intact on its compelling growth story, stable operations with added capacity and continuous improvements to derive higher values per kilometre flown. In addition, we believe its integrated efforts to monetise its assets via digitalisation is strategic as it takes advantage of its passengers’ database to enhance customer experience and improve ancillary income. — MIDF Research, Oct 29