Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on March 2, 2020

AirAsia Group Bhd
(Feb 28, RM1)
Maintain neutral with a lower target price of RM1.14:
AirAsia Group Bhd (AAGB) recorded financial year ended Dec 31, 2019 (FY19) normalised net loss of RM345.7 million (versus the RM77.1 million net profit for FY18, missing our and consensus expectations by a variance of more than 10%.

The negative variance was due to the substantial increase in finance costs-lease liabilities and depreciation of right of use of assets following the adoption of the Malaysian Financial Reporting Standard 16, which was more than what we had expected. In addition, there were higher maintenance expenses due to a higher number of leased aircraft following lessor requirements.

AAGB’s FY19 revenue was up by 12.5% year-on-year (y-o-y) to RM12 billion. The robust growth was due to another record-breaking number of passengers carried in the fourth quarter of 2019 (4Q19) of 13.2 million, supported by the year-end festive season. As a result, the number of passengers carried in FY19 grew by 16% y-o-y to 51.6 million.

The increase in passengers which contributed to higher FY19 ticket sales of 20.3% to RM9.2 billion, also resulted in its airline- related ancillary income revenue to grow by 11.5% y-o-y.

As Covid-19 has spread further in countries outside of China, global travel demand will continue to wane, prompting further capacity cuts across AAGB’s network. Following this, we are now expecting a decline instead of a smaller growth in revenue passenger kilometre, especially for Malaysia AirAsia and Thai AirAsia which will drag down load factors to below 80%. — MIDF Research, Feb 28

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