Given the level of competition in the marketplace, we had expected weak results but AirAsia's 9M13 core net profit of RM376m still fell below our expectations. Due to yield pressure, it accounted for just half of our previous full-year forecast against a more typical 55-60%. We believe yield pressure will persist in 2014 as MAS is intent on defending its market share. As such, we downgrade from Outperform to Neutral and cut FY13-15 core EPS estimates 16-20% for lower yields. Our target price is also reduced, still based on 11x CY15 P/E, the sector average. We expect only pedestrian group EPS growth in FY14 and FY15 as the Malaysia earnings fall, only to be offset by better associate earnings.
We believe yield pressure will persist in 2014 as MAS is intent on defending its market share. As such, we downgrade from Outperform to Neutral and cut FY13-15 core EPS estimates 16-20% for lower yields. Our target price is also reduced, still based on 11x CY15 P/E, the sector average. We expect only pedestrian group EPS growth in FY14 and FY15 as the Malaysia earnings fall, only to be offset by better associate earnings.
Highlights of 3Q13
AirAsia reported 3Q13 group core earnings of RM146m, down 12% yoy. The key Malaysia earnings fell 22% yoy on the back of a 12.2% fall in base yield as competition hit hard, coupled with a 3.8% weakening of the ringgit, which lifted AirAsia‟s substantial US$ cost base. The base yield decline in 3Q13 had accelerated from the 10.6% yoy fall for 2Q13. The weakness in Malaysia was augmented by the collapse in Indonesia‟s bottomline as yields also fell from competition and the rupiah depreciated. But Japan‟s losses have stopped and Thailand‟s profits grew healthily during 3Q13. The net effect was that the better yoy overall associate performance helped temper, but could not completely overcome, the pressure on Malaysia.
The wake-up call
AirAsia announced recently that its two founders have been redesignated to executive board positions and are moving their base from Jakarta back to Kuala Lumpur, admitting that they have been "complacent" and "taken their eye off the ball" in Malaysia. Clearly, urgent intervention is needed to fight the mother of all wars.
Reasons to fret
AirAsia may suffer fare deflation for at least the next two years as the current heavy competition could prevent it from passing through to passengers the 9% rise in landing charges from Jan 2014 onwards, the impending 9-11% rise in airport passenger service charges in Feb and the 6% GST from Apr 2015 onwards.
没有评论:
发表评论