Excel – http://1drv.ms/1Alp2gO
– Fair Value
– Absolute EY% Valuation
– FY13 (EPS: 0.13) – Fair value 1.99 (Fair Value Uncertainty: HIGH)
– R4Q (EPS: 0.272) – Fair value 4.16 (Fair Value Uncertainty: MEDIUM)
– FY14 (EPS: 0.177) – Fair value 2.7 (Fair Value Uncertainty: HIGH)
– FY15 (EPS: 0.268) – Fair value 4.08 (Fair Value Uncertainty: MEDIUM)
– EPS applied to reach the current stock price (2.44): 0.16
– I take the view that the domestic aviation sector has seen its worst and are now on a recovery phase with competition intensity lessening and lower fuel price going forward
– Yields are at an inflection point. With MAS restructuring and the likelihood of its 20-30% capacity cut next year, the upward airfare pricing rationalisation is expected to kick in on a stronger note then.
– TAA to turnaround in 4Q14. Looking forward, management expects a more rationale market as competitors have been reducing capacity in line with AirAsia to optimize profit levels in Malaysia. In Thailand, management expects TAA to return to profit in 4Q14 and will continue adding capacity in 2015. In Indonesia, IAA is expected to be profitable as it will continue be focusing on cost reduction exercise.
– Net increase of 5 aircraft in 2015. Of the 13 new aircraft scheduled for delivery in 2015, AirAsia will defer 4 aircraft deliveries and swap to NEO. Also, it will put 4 aircraft to the market for sale. With the balance of 5 new aircraft, one will be allocated for MAA’s operations and 4 will be allocated for TAA’s operations in 2015.
– Fuel cost trends are improving with even lower spot jet fuel price in 4Q14 and as Airasia works off its remaining fuel hedges by year end. For FY15, only 12% of requirement is hedged, which means the full benefit of cheaper jet fuel should trickle in more significantly in 1Q15.
Latest Financial – Q3 2014 Financial Report (20 Nov 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1798989
At the time of writing, I owned shares of AIRASIA.