Results Preview AirAsia’s 9M profit to fall by 12% on yield erosion

Business & Markets 2013
Written by Zatil Husna of theedgemalaysia.com
Thursday, 14 November 2013 10:47
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KUALA LUMPUR (Nov 14): RHB Research has maintained its Buy rating on
AirAsia Bhd at RM2.54 with a lower fair value of RM3.63 (from RM3.94) and
said it expects the airline to post lower profit by 12% year-on-year (y-o-y) for
the nine months ended Sept 30, 2013 due to yield erosion.
In a note Thursday, the research house said it expects AirAsia to report 3Q13
revenue, earnings before interest, tax, depreciation and amortisation
(EBITDA)and core earnings of RM1.28 billion, RM373 million and RM129
million respectively.
It said AirAsia had posted 11% increase in passenger numbers y-o-y with
unchanged load factor for the third quarter of 2013 (3Q13).
“As yields will continue to be under pressure, its 9M13 earnings are expected to
decline by 12% ytd, accounting for 58% of FY13 forecasts (9M12: 60%),” it
said.
The research firm said that yields in the 3Q13 are expected to pick up quarteron-
quarter (q-o-q) but will drop 8% y-o-y on the challenging landscape.
“We note that the carrier is lowering its airfares to sustain these loads to raise
awareness and stimulate demand.
“Thus, we expect yields to drop by 4%, 1% and 2% for FY13F, 14F and 15F
respectively, due to intensifying competition from Malindo Air and Malaysian
Airline System," it said.
However, the research house said that FY14 is expected to be a better year as
earnings from associates improves and the listing of Indonesia AirAsia to
crystallise valuations.