2Q14 results will be released on 19th Aug. Expect core net loss of MYR133m (+434% YoY, +120% QoQ).
Lower load factor, weak yields, and higher unit cost were the main culprits.
Take profit with a lower MYR0.72 TP (from MYR0.79); 2Q14 losses will stretch Company’s capital structure. SELL.
As at end-2Q14, we estimate the Company would be left with critical cash of <MYR50m and net gearing would have soared to >2.0x (versus 1.6x in end-1Q14). The Company’s capital structure is at stretched levels and this has raised the risk and probability for new equity issuance within the next 12-months.
We now project AirAsia X to make a core net loss of MYR113.8m in FY14 (from a loss of MYR67.1m previously) due to the weak 2Q14. Our FY15/16 earnings are cut by 13.3%/8.8%. We advise investors to take profit after a strong rally in its share price; our new TP of MYR0.72 (from MYR0.79), is based on unchanged FY15 P/BV of 1.0x
Source: Maybank Research - 14 Aug 2014
Lower load factor, weak yields, and higher unit cost were the main culprits.
Take profit with a lower MYR0.72 TP (from MYR0.79); 2Q14 losses will stretch Company’s capital structure. SELL.
What’s New
AirAsia X’s 2Q14 operating statistics were satisfactory; passengers carried grew by 46% YoY with a slightly lower load factor of 80.4% versus 81.8% in 2Q13. QoQ however, passengers carried was down 6% while load factor weakened by 5.5ppts. Consequently, we expect AirAsia X to report record losses in the period due also to weaker yields and higher unit cost due to the stronger MYR.What’s Our View
AirAsia X’s strategy of aggressive growth coincides at a time when the market is soft and overcapacity is at its peak. Furthermore, the MH370 incident has led to a drop in consumer sentiment and resulted in severe yield deterioration. We expect 2Q14 core net loss of MYR132.9m, a fourfold increase from 2Q13’s losses of MYR24.9m, and double 1Q14’s losses of MYR60.3m. This would be below ours and consensus expectations.As at end-2Q14, we estimate the Company would be left with critical cash of <MYR50m and net gearing would have soared to >2.0x (versus 1.6x in end-1Q14). The Company’s capital structure is at stretched levels and this has raised the risk and probability for new equity issuance within the next 12-months.
We now project AirAsia X to make a core net loss of MYR113.8m in FY14 (from a loss of MYR67.1m previously) due to the weak 2Q14. Our FY15/16 earnings are cut by 13.3%/8.8%. We advise investors to take profit after a strong rally in its share price; our new TP of MYR0.72 (from MYR0.79), is based on unchanged FY15 P/BV of 1.0x
Source: Maybank Research - 14 Aug 2014
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