2Q14 core net loss of MYR164.8m (+562% YoY, 173% QoQ) was greater than forecast on weak yields and higher cost.
All sectors were loss making with the exception of Nepal.
Maintain SELL with an unchanged target price of MYR0.72; group’s balance sheet is extremely stretched.
i. The Australian and Chinese sectors are struggling, and may require more time to stabilise and revert to profitability.
ii. KLIA2 is starting to provide positive benefits; more passengers are connecting and thus getting the “hub” effect.
iii. Management reaffirms that 2H14 will be better than 1H14 and will be profitable.
We keep our earnings forecasts, SELL recommendation and target price of MYR0.72 unchanged. FY14 is a forgone conclusion, and the market is looking into a hope of a turnaround in 2015. Our target price is premised on an unchanged FY15 P/BV of 1.0x
Source: Maybank Research - 20 Aug 2014
All sectors were loss making with the exception of Nepal.
Maintain SELL with an unchanged target price of MYR0.72; group’s balance sheet is extremely stretched.
What’s New
AirAsia X’s 1H14 core net loss of MYR225.1m (versus a core net profit of MYR19.1m in 1H13) was larger than expected, at 198% of house and 276% of street forecasts. The results disappointed despite 1H being a seasonally weak period for AirAsia X and it typically makes most of its profits in 2H. Some noteworthy updates from the management are as follows:i. The Australian and Chinese sectors are struggling, and may require more time to stabilise and revert to profitability.
ii. KLIA2 is starting to provide positive benefits; more passengers are connecting and thus getting the “hub” effect.
iii. Management reaffirms that 2H14 will be better than 1H14 and will be profitable.
What’s Our View
The weak performance is linked to the weak markets and also the indirect impact of the MH370 disaster that has negatively impacted the Malaysian aviation industry as a whole. 2H14 should be better, but we note that the balance sheet is stretched at 1.7x net gearing as at Jun 2014 and set to soar to >2.0x by the end of 2014.We keep our earnings forecasts, SELL recommendation and target price of MYR0.72 unchanged. FY14 is a forgone conclusion, and the market is looking into a hope of a turnaround in 2015. Our target price is premised on an unchanged FY15 P/BV of 1.0x
Source: Maybank Research - 20 Aug 2014
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