May 09, 2014
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SEE PAGE 15 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)
Malaysian Aviation NEUTRAL (unchanged)
1Q14 results preview 1Q14 results season underway: MAHB already posted on 25
Apr, MAS to release on 15 May, AirAsia X on 19 May, and
AirAsia on 20 May.
Strong passenger traffic growth of 18.4% YoY for the airlines;
industry load factor was up 1.3ppt to 79.5%.
Maintain NEUTRAL, AirAsia (top BUY), AirAsia X (BUY), MAS
(HOLD) and MAHB (SELL).
What’s New
All airlines have posted their 1Q14 traffic statistics ahead of their
results. The headline numbers are impressive; total passenger
traffic grew by 18.4% YoY with a load factor of 79.5% (vs. 78.2% in
1Q13).
What’s Our View
We don’t expect head-turning financial numbers for 1Q14, only
AirAsia will be profitable whereas MAS and AirAsia X will still be
firmly in loss-making territory. The culprit remains low yields.
We are optimistic that this is the bottom of the cycle. We notice
that published ticket prices are on the uptick since Feb/Mar
especially for domestic Malaysia and international routes. There
are some weak segments (China, Australia, Thailand) but the
overall impact is limited. Furthermore, the industry is deploying
modest capacity growth in 2014 and this will ensure the supply-
demand relationship is in balance and will support yield growth.
All the airline stocks are trading at their lowest levels in the past
year and we think it is a good time to accumulate on cheap
valuations. AirAsia is our top BUY pick, followed by AirAsia X. MAS
is on fair value territory and we advocate HOLD. MAHB is our sole
SELL for the sector as the stock is expensive and has a high debt
burden relative to its peer group.
Analysts
Mohshin Aziz
(603) 2297 8692
Malaysian aviation sector – Peer valuation summary
Stock Rec Shr
px
Mkt cap TP PER (x) PER (x) PER (x) P/BV
(x)
P/BV
(x)
ROE
(%)
ROE
(%)
Net yield
(%) MYR MYR m MYR CY14F CY15F CY16F CY14F CY15F CY14F CY15F CY14F
Airlines:
AirAsia BUY 2.20 6,122 2.65 10.5 10.4 9.9 1.32 1.19 13.3 12.1 2.3
AirAsia X BUY 0.75 1,778 0.86 38.6 8.5 5.4 1.15 0.86 3.3 11.6 -
MAS HOLD 0.22 5,097 0.22 - 15.3 7.6 0.96 0.90 - 6.1 -
Simple avg 24.6 11.4 7.6 1.14 0.98 8.3 9.9 2.3
MAHB SELL 8.03 11,161 7.03 24.6 26.1 20.1 1.88 1.81 7.8 7.1 1.8
Source: Maybank KE
May 09, 2014 2
Aviation Sector – 1Q14 Results Preview
Impressive 1Q14 operating statistics
Traffic growth remains robust
Passenger traffic grew by 18.4% YoY in 1Q14, which makes Malaysia the
fastest growing country in Asia Pacific. As shown in the table below, MAS
carried 20.7% more passengers YoY in 1Q14, which constituted 31.6% of the
total industry growth. AirAsia X’s growth of 66.9% YoY constituted 13.5% of
the total industry growth. Traffic of the other airlines, not including
AirAsia, grew 23.1% YoY, constituting 48.5% of the total industry growth.
Malindo Air does not divulge its operating statistics, but we believe it
formed the biggest chunk of the growth in the “other airlines” category. It
can be surmised that both MAS and Malindo are the biggest growth
provider for the Malaysian airline industry in 1Q14, as the case has been
for the past four quarters.
Malaysia traffic growth by airlines and attribution analysis
Passenger carried 1Q14 1Q13 % YoY change % attribution
AirAsia 5,373,202 5,168,167 4.0% 6.4%
AirAsia X 1,080,763 647,366 66.9% 13.5%
Malaysian Airlines 5,895,000 4,883,000 20.7% 31.6%
Other airlines 8,276,558 6,722,982 23.1% 48.5%
Total 20,625,523 17,421,515 18.4% 100.0%
Sources: Respective companies’ data
Load factor holding strong
The industry load factor was 79.5% in 1Q14, a growth of 1.3ppt from a year
ago. As for individual airlines, AirAsia and AirAsia X both have seen
respectable YoY load factor growth from an already high level achieved
back in 1Q13. MAS saw a slight dip of 0.2ppt YoY to 76.4%, but this is
respectable given that the airline had to grapple with the MH370 incident
during the period.
Malaysia-based airlines’ average load factor Malaysia-based airlines’ load factor
Sources: Respective companies’ data, Maybank KE Sources: Respective companies’ data, Maybank KE
71.7%
76.2%
77.5%77.9%
81.0%
79.5%
66%
68%
70%
72%
74%
76%
78%
80%
82%
2009 2010 2011 2012 2013 1Q14
77.9%
80.0%
78.2%
84.6%
80.7%
84.2%
81.8% 82.3%
80.9%
85.8%
76.6%
80.4%
84.8%
81.6%
76.4%
70%
75%
80%
85%
90%
1Q13 2Q13 3Q13 4Q13 1Q14
AirAsia AirAsia X MAS
May 09, 2014 3
Aviation Sector – 1Q14 Results Preview
Yields expected to stabilise
We believe that the fare war of 2013 had reached its tail end back in 4Q13
and will show some credible signs of stabilisation in 1Q14 with a lower
yield drop. The yields should be higher YoY from 2Q14 onwards. This is
based from our observation that published ticket prices are higher YoY for
all domestic sectors, European and some regional sectors. However, we
note that published fares to Australia, Thailand and selected Chinese
destinations (Beijing, Xian, and Shanghai) remain very cheap.
Malaysia-based airlines’ yield trend in 2013
Sources: Respective companies’ data, Maybank KE
Unit cost expected to be marginally lower
The average jet fuel price for 1Q14 was USD130.8/bbl, which was 2.5%
lower than in 1Q13. However, cost savings from the lower fuel price is
partially negated by the MYR:USD depreciating by 6.8% YoY to 3.2883 in
1Q14. In addition, MAHB has imposed a 9% and 18% increase in landing and
parking charges respectively starting 1st Jan 2014. Taking into account all
these factors, we expect the airlines to show a modest unit cost reduction
of ≤1% YoY in 1Q14.
No change in passenger service charges (PSC). The PSC at the airports
was supposed to have increased by 10% on 12 Feb 2014 as part of the
operating agreement between MAHB and the government. However, the
government remained silent on this matter and therefore the old tariff
remains. This is positive for the airlines as a PSC increase would
negatively impact yields.
-20%
-10%
0%
10%
20%
30%
1Q13 2Q13 3Q13 4Q13 1Q14F
MAS AirAsia AirAsia X Industry Average
The cycle has
bottomed in 4Q13
May 09, 2014 4
Aviation Sector – 1Q14 Results Preview
Other developments
We believe for the remainder of 2014, passenger traffic growth will
moderate to ≤10% YoY. This is due to the following factors: 1) higher base
effect as Malindo launched its services back in 2Q13; 2) MAS is
progressively reducing its fleet size from Apr 2014 onwards; and 3) AirAsia
will grow its fleet on the backend of 2014.
MH370 will impact on short term demand
The unfortunate MH370 incident on 8th March will negatively impact
demand for air travel in the short term. Other similar historical incidents
saw two to three months of weakness in air travel demand before a full
recovery. We don’t think this incident will pose a long term structural
impact on the Malaysian aviation industry. We keep our full year 2014
passenger traffic growth target of 9%-10% unchanged.
klia2 opened on 2 May
klia2 officially launched its services on 2 May. This is a positive
development as we initially forecast 1 Sep as our base case opening date.
The initial reception was very good and so far, the terminal has been
operating seamlessly. We expect klia2 operations will take two to three
months to stabilise before all the airlines operating from the terminal to
re-commence their growth plans.
Good for AirAsia X and Malindo. klia2 will bring instant benefits to airlines
such as AirAsia X and Malindo. The airport has an international concourse
and this will enable passengers to make seamless transits within the
enclave of the terminal. This benefits AirAsia X and Malindo tremendously
as their business models are highly reliant on transiting passengers.
Malindo will also benefit from the lower PSC at klia2 compared to the main
terminal (~50% cheaper), and this will boost its competitiveness against
the AirAsia Group.
Mixed for AirAsia. klia2 is a mixed blessing for AirAsia in our view. The
bigger and better terminal will provide the platform for long term growth
and enhance its customer experience. But it has to abandon many of its
LCC practices such as not using aerobridges and a swift 25 minute aircraft
turnaround is not possible with this terminal layout. In many ways, we
think AirAsia has to tweak its operations and become a network carrier in
order to fully take advantage of its home base at klia2.
Bad for MAS. Currently, the PSC at klia2 is half of that for the KLIA main
terminal. This is despite klia2 is equal in terms of amenities and passenger
comfort. This may result in some of MAS’ core passengers switching to
other airlines based at klia2 due to the cheaper all-in cost (ticket fare +
PSC) and the fact that the comfort margin has narrowed.
May 09, 2014 5
Aviation Sector – 1Q14 Results Preview
Stock Recommendation
AirAsia (BUY, TP: MYR2.65)
AirAsia has taken an evasive strategy to halt capacity growth in order to
retain its high load factor and reduce unit cost. We estimate a 1Q14 core
net profit of MYR135.6m (-8.4% YoY) due to the impact of lower yields.
This would be within our expectation for the full-year. Now that the
market supply-demand is in balance, AirAsia can push for higher yields. We
already see this happening, as its published fares today are higher than a
year ago. Maintain BUY, with a target price of MYR2.65, based on FY14 PER
of 10.5x, which is on par with the global LCC average.
AirAsia X (BUY, TP: MYR0.86)
AirAsia X continues to enjoy strong support for its services, as evident from
its record load factor of 85.8% in 1Q14 despite adding a whopping capacity
growth of 60% YoY. We estimate a 1Q14 core net loss of MYR50.1m (vs a
profit of MYR44.0m in 1Q13) due to the impact of lower yields. This would
be below ours and consensus expectation for FY14. The situation should
improve significantly from 3Q14 onwards as MAS has effectively reduced
capacity on selected international routes ─ due to aircraft redelivery
plans, this will enable AirAsia X to push for higher yields. Furthermore,
many of its routes have become mature and contribute positively to the
group. We maintain our BUY call, with a revised target price of MYR0.86,
based on FY15 P/BV of 1.0x.
MAS (HOLD, TP: MYR0.22)
This is an exceptionally difficult period for MAS. The MH370 incident has
negatively impacted the airline’s reputation and this greatly inhibits its
effort to push for higher yields. Furthermore, there has not been much
clarity over the on-going costs relating to the MH370 incident. We estimate
an out of pocket expense of MYR60-100k per day for the accommodation
and other expenses for the next of kin of MH370 passengers. It is difficult
to make earnings forecast for 1Q14 under the circumstances, we estimate
MAS to make a core net loss of MYR250-300m, down from a loss of
MYR340m in 1Q13. We rate MAS a HOLD based on 0.9x 2014 P/BV ─ its
trough valuation for the past decade.
MAHB (SELL, TP: MYR7.03)
MAHB had a clean 1Q14, with a core net profit of MYR123.5m (+15.6% YoY,
+61.4% QoQ) on the back of an 18.4% YoY passenger growth. The upcoming
quarters will be weaker due to lower passenger traffic growth expectation
and the start-up costs associated with klia2. MAHB is a SELL with a target
price of MYR7.03 based on 2015 EV/EBITDA of 10.3x ─ which is a 10%
premium to global peers after considering MAHB’s strong growth potential.
The stock is expensive with a high debt burden relative to its peer group.
May 09, 2014
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AirAsia (AIRA MK)
Share Price: MYR2.20 MCap (USD): 1.9B Malaysia BUY Target Price: MYR2.65 (+20%) ADTV (USD): 5.2M Aviation (unchanged)
1Q14F: First sign of recovery 1Q14 results will be released on 20th May. Expect core net
profit of MYR136m, a decline of 8.4% YoY.
Weak yields have more than offset the positive impact of
higher load factor and lower unit cost.
Maintain BUY, with an unchanged target price of MYR2.65
pending an analyst briefing post the results announcement.
What’s New
AirAsia’s 1Q14 operating statistics was positive, traffic grew by
4.0% YoY with a load factor of 80.6% (vs. 78.5% in 1Q13). However,
we expect the financial results to be weak due to the weak yield
environment and the depreciated ASEAN currencies against the
USD.
What’s Our View
AirAsia has taken an evasive strategy to halt capacity growth in
order to retain its high load factor and reduce unit cost. This is a
wise decision to ensure it remains profitable, and also to position
its resources on standby mode and ready to react when the market
demands for it. We estimate a 1Q14 core net profit of MYR135.6m
(-8.4% YoY) due to the impact of lower yields. This would be within
our expectations for the year and within consensus as well.
Now that the market supply-demand is in balance, AirAsia can push
for higher yields. We already see this happening, as its published
fares today are higher than a year ago. Maintain BUY, with a target
price of MYR2.65, based on FY14 PER of 10.5x, which is on par with
the global LCC average. We await the post results analyst briefing
before making any adjustments to our financial forecasts and fair
value estimate, if any.
Key Data
Shariah status NO
52w high/low (MYR) 3.54/2.18
Free float (%) 68.4
Issued shares (m) 2,781
Market capitalization MYR6.1B
Major shareholders:
TUNE AIR SDN BHD 23.0% WELLINGTON
MANAGEMEN 8.1%
EMPLOYEES
PROVIDENT 8.0%
Share Price Performance
1 Mth 3 Mth 12 Mth
Absolute (%) (7.2) (1.3) (27.2)
Relative to country (%) (7.7) (5.7) (32.2)
Maybank vs Market
Positive Neutral Negative
Market Recs 16 9 3
Maybank Consensus % +/-
Target Price (MYR) 2.65 2.80 (5.4)
2014 Net Profit
(MYR m) 705 708 (0.4)
2015 Net Profit
(MYR m) 710 828 (14.4)
Source: Bloomberg; Maybank
FYE <<FYEMonthAbbr>>
(MYR m)
2012A 2013 2014F 2015F 2016F Revenue 4,946.1 5,189.2 5,709.5 6,149.0 6,523.5 EBITDAR 1,765.9 1,845.1 2,152.9 2,326.4 2,492.2
Core net profit 706.9 417.6 705.1 709.5 741.6
Core EPS (sen) 25.4 15.0 25.3 25.5 26.7
Core EPS growth (%) -14.5 -41.0 68.8 0.6 4.5 Net DPS (sen) 24.0 4.0 5.0 5.0 5.0
BVPS (MYR) 192.6 180.0 200.7 222.1 244.2
Core P/E (x) 8.6 14.7 8.7 8.6 8.3 EV/EBITDAR (x) 7.7 9.0 7.8 7.8 7.4
Net dividend yield (%) 10.5 1.8 2.3 2.3 2.3
P/BV (x) 1.14 1.22 1.10 0.99 0.90 Net debt/equity (%) 116.2 175.5 166.2 176.1 166.5
ROAE (%) 13.2 8.1 13.3 12.1 11.4
ROAA (%) 4.2 2.5 4.0 3.7 3.5
Chg in net profit (%) - - n/a n/a n/a
Mohshin Aziz
(603) 2297 8692
1,500
1,575
1,650
1,725
1,800
1,875
1,950
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
May-12 Nov-12 May-13 Nov-13
AIRA MK EquityFBMKLCI Index
Resu
lts
Pre
vie
w
May 09, 2014 7
Aviation Sector – 1Q14 Results Preview
1Q14 results expectations
The table below shows that almost all of AirAsia’s operations are expected
to see YoY profit declines, led by Thailand due to the challenging domestic
political situation that has dented demand for air travel. Indonesia is
suffering from weak IDR against the USD. The airlines in Philippines and
India are still in the early stages of business development and therefore
incurring operational losses.
Summary of results (projected)
FY 31 Dec (MYR '000) 1Q14F 1Q13A % YoY 4Q13A % QoQ
PROFITS FROM INDIVIDUAL BUSINESS SEGMENT:
Malaysia operations (100%) 131,825 157,148 (16.1) 154,919 (14.9)
Thailand operations (45%) 12,912 34,775 (62.9) 19,228 (32.8)
Indonesia operations (49%) (9,051) 212 n/a (57,320) (84.2)
Sub-total for airline business 135,686 192,135 (29.4) 116,827 16.1
Other new business start-ups
Asian Aviation CAE (50%) 2,375 1,900 25.0 (1,700) (239.7)
Expedia AAE Travel (50%) 9,400 (4,250) n/a 9,400 0.0
BIG (50%) (750) (950) (21.1) (750) 0.0
AirAsia Philippines (40%) (8,000) (8,000) 0.0 (9,920) (19.4)
AirAsia India (49%) (3,136) 0 n/a (3,136) 0.0
AirAsia Japan (49%) 0 (32,830) n/a 0 n/a
Sub-total for new businesses (111) (44,130) (99.7) (6,106) n/a
Total Core Net Profit 135,575 148,005 (8.4) 110,721 22.4
Group Core EPS 4.9 5.3 (8.4) 4.0 22.6
Source: Company, Maybank KE (1Q14F)
Things will get better from 2Q14 onwards
The positive key take away from this anticipated result is that this will be
the last quarter of YoY profit decline, and we expect profit growth from
2Q14 onwards. This is because the Malaysian fare war started back in
2Q13, and it has peaked in 4Q13. The situation has since improved and we
notice that AirAsia’s published fares are much higher than they were a
year ago.
May 09, 2014 8
Aviation Sector – 1Q14 Results Preview
INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)
FY Dec 2013 2014F 2015F 2016F FY Dec 2013 2014F 2015F 2016F
Revenue 5,189.2 5,709.5 6,149.0 6,523.5 Fixed Assets 11,246.2 12,361.0 14,591.7 15,665.9
EBITDAR 1,845.1 2,152.9 2,326.4 2,492.2 Other LT Assets 2,633.7 2,633.7 2,633.7 2,633.7
Depreciation & Amortisation 634.5 715.2 818.6 925.3 Cash/ST Investments 1,385.4 1,363.8 977.7 1,153.2
Operating Profit 1,021.3 1,189.9 1,259.9 1,319.0 Other Current Assets 1,916.1 2,043.4 2,150.9 2,242.5
Interest (Exp)/Inc (368.2) (459.4) (512.6) (555.7) Total Assets 17,181.
3
18,401.
9
20,353.
9
21,695.
3 Forex and exceptionals (289.9) 0.0 0.0 0.0
Pre-Tax Profit 363.2 730.5 747.3 763.3 ST Debt 1,081.5 1,081.5 1,081.5 1,081.5
Tax 0.9 (12.9) (12.7) (9.1) Other Current Liabilities 1,723.4 1,890.8 2,032.3 2,151.8
Minority Interest 0.0 0.0 0.0 0.0 LT Debt 9,089.4 9,563.1 10,778.2 11,384.1
Reported Net Profit 364.1 717.6 734.6 754.2 Other LT Liabilities 281.1 281.1 281.1 281.1
Non-cash items 53.6 (12.5) (25.1) (12.5) Minority Interest 0.0 0.0 0.0 1.0
Core Net Profit 417.6 705.1 709.5 741.6 Shareholders' Equity 5,006.0 5,585.3 6,180.8 6,795.9
Total Liabilities-Capital 17,181.
3
18,401.
9
20,353.
9
21,695.
3 Revenue Growth % 4.9 10.0 7.7 6.1
EBITDAR Growth (%) 4.5 16.7 8.1 7.1 Share Capital (m) 2,782.6 2,782.6 2,782.6 2,782.6
EBIT Growth (%) (0.7) 16.5 5.9 4.7 Net Debt 8,785.5 9,280.8 10,882.0 11,312.3
Reported Net Profit Grth (%) (48.6) 97.1 2.4 2.7 Capitalised leases 1,639.0 1,391.1 1,143.3 895.4
Core Net Profit Growth (%) (40.9) 68.8 0.6 4.5 Working Capital 496.6 434.8 14.8 162.4
Tax Rate % (0.2) 1.8 1.7 1.2 Adjusted Net Gearing % 208.2 191.1 194.6 179.6
CASH FLOW (MYR m) RATES & RATIOS
FY Dec 2013A 2014F 2015F 2016F
FY Dec 2013A 2014F 2015F 2016F
Profit before taxation 363.2 730.5 747.3 763.3
Dep. & Amort. 634.5 715.2 818.6 925.3 EBITDAR Margin (%) 35.6 37.7 37.8 38.2
Cash tax paid (368.2) (459.4) (512.6) (555.7) EBIT Margin (%) 19.7 20.8 20.5 20.2
FRS and derivatives (271.7) 40.2 34.0 28.9 Reported Net Prf Margin (%) 7.0 12.6 11.9 11.6
Chg in Wkg.Cap. (11.1) (12.9) (12.7) (9.1) Core Net Profit Margin (%) 8.0 12.3 11.5 11.4
Other Operating CF 486.2 459.4 512.6 555.7 ROAE (%) 8.1 13.3 12.1 11.4
Net Operating CF 833.0 1,473.0 1,587.2 1,708.4 ROA (%) 2.5 4.0 3.7 3.5
Capital Exp.(net) (2,095.8) (2,122.5) (3,049.2) (2,287.6) ROCE (%) 8.0 12.3 11.5 11.4
Other Invts.(net) 4.2 292.5 0.0 288.0 Div Cover (x) 3.8 5.1 5.1 5.3
Invts in Assoc. & JV Interest Cover (x) 2.8 2.6 2.5 2.4
Div from Assoc & JV Current Ratio (x) 1.2 1.1 1.0 1.1
Other Investing CF (123.0) 0.0 0.0 0.0 Adj. Net Debt/Equity (%) 208.2 191.1 194.6 179.6
Net Investing CF (2,214.6) (1,830.0) (3,049.2) (1,999.6) Capex to Debt (%) (20.1) (19.9) (25.4) (18.7)
Div Paid (667.2) (139.1) (139.1) (139.1) N.Cash/(Debt)PS (sen) 374.6 383.5 432.2 438.7
Chg in Gross Debt 1,200.2 473.7 1,215.1 605.8 Opg CFPS (sen) 29.9 52.9 57.0 61.4
Capital Issues 1.2 0.0 0.0 0.0 Free CFPS (sen) (45.4) (23.3) (52.5) (20.8)
Other Financing CF 6.0 (0.1) (0.9) (0.9)
Net Financing CF 541.2 335.4 1,076.0 466.7 Asset Turnover (x) 0.3 0.3 0.3 0.3
Net Cashflow (840.4) (21.6) (386.1) 175.5 Asset/Debt (x) 1.7 1.7 1.7 1.7
Debt / EBITDAR (x) 5.6 5.0 5.2 4.9
Free cash flow (1,262.8) (649.5) (1,462.0) (579.1) Debt / Mkt cap (x) 1.6 1.6 1.8 1.8
May 09, 2014
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AirAsia X (AAX MK)
Share Price: MYR0.75 MCap (USD): 0.5B Malaysia BUY Target Price: MYR0.86 (+15%) ADTV (USD): 1.1M Aviation (unchanged)
1Q14F: Still got the Aussie flu 1Q14 results will be released on 19th May. Expect core net
loss of MYR50m, a reversal from a profit of MYR44m in 1Q13.
Weak yields and higher unit cost would have more than
offset the positive impact of higher load factor.
Maintain BUY, but with a lower target price of MYR0.86.
What’s New
AirAsia X’s 1Q14 operating statistics was terrific; traffic grew by
60% YoY with a record load factor of 85.8% (vs. 84.2% in 1Q13).
However, we expect AirAsia X to be loss making in the period due
to the persistent weak Australian market.
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. This has caused
severe yield deterioration. We expect 1Q14 core net loss of
MYR50.1m (vs profit of MYR44.0m in 1Q13; loss of MYR57.6m in
4Q13). This would be below ours and consensus expectations.
AirAsia X will be loss making in 2Q14 as well, we estimate, as it is a
seasonally weak quarter. We believe it will only start being
profitable from 3Q14. The market supply-demand has improved
and industry yields are recovering. Also, many of AirAsia X’s new
routes will become mature and start to contribute positively.
We cut our FY14-16 earnings forecasts by -72.5%/-28.4%/-10.0%
after taking into account the current yield environment and the
latest fleet deployment plan. We maintain our BUY call, with a
revised target price of MYR0.86 (previously MYR1.06), based on
FY15 P/BV of 1.0x. The share price has fallen by 40% since its IPO
and the market is overly bearish in our view, the Company is in the
cusp of a turnaround and is bound to deliver strong profits.
Key Data
Shariah status NO
52w high/low (MYR) 1.28/0.74
Free float (%) 35.9
Issued shares (m) 2,370
Market capitalization MYR1.8B
Major shareholders:
TUNE AIR SDN BHD 17.8% EPF 13.8%
WELLINGTON
MANAGEMEN
7.1%
Share Price Performance
1 Mth 3 Mth 12 Mth
Absolute (%) (1.3) (23) na
Relative to country (%) (1.9) (27) na
Maybank vs Market
Positive Neutral Negative
Market Recs 1 8 6
Maybank Consensus % +/-
Target Price (MYR) 0.86 0.84 2.1
2014 Net Profit
(MYR m)
46 44 5.7
2015 Net Profit
(MYR m)
210 120 75.6
Source: Bloomberg; Maybank
FYE <<FYEMonthAbbr>>
(MYR m)
2012A 2013A 2014F 2015F 2016F Revenue 1,967.4 2,307.5 3,437.6 4,294.7 4,992.6 EBITDAR 308.5 361.3 591.7 826.7 1,032.5
Core net profit (5.8) (22.2) 46.1 209.9 329.4
Core EPS (sen) (0.2) (0.9) 1.9 8.9 13.9
Core EPS growth (%) n/a 279.7 -307.8 355.4 56.9 Net DPS (sen) - - - - -
BVPS (MYR) 24.5 52.2 65.0 87.3 115.9
Core P/E (x) n/a na 38.6 8.5 5.4 EV/EBITDAR (x) 17.7 16.0 11.7 9.3 7.5
Net dividend yield (%) - - - - -
P/BV (x) 3.06 1.44 1.15 0.86 0.65 Net debt/equity (%) 6.3 3.2 3.3 2.8 2.2
ROAE (%) n/a (2.4) 3.3 11.6 13.7
ROAA (%) n/a (0.7) 1.0 3.2 3.9
Chg in net profit (%) - - (72.5) (28.4) (10.0)
Mohshin Aziz
(603) 2297 8692
1,500
1,575
1,650
1,725
1,800
1,875
1,950
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Jul-13 Sep-13 Nov-13 Jan-14 Mar-14
AAX MK EquityFBMKLCI Index
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May 09, 2014 10
Aviation Sector – 1Q14 Results Preview
1Q14 results expectations
We estimate AirAsia X will be loss making in 1Q14, due to the impact of
weak yields. We forecast yield decline of 12.2% YoY, due to the weak
markets and also the impact of new route launches. The Australian routes
in particular, are extremely weak and this is a common complaint by MAS
management. Unit cost has also increased by 4.6% YoY, we estimate, due
to the 6.8% YoY weakening of the MYR against the USD. Approximately 70%
of AirAsia X’s operating costs are USD denominated, and this had a
profound impact on AirAsia X’s unit cost.
Summary of results (projected)
FY 31 Dec (MYR '000) 1Q14F 1Q13A % YoY 4Q13A % QoQ
Passenger revenue 569.6 419.0 35.9 516.5 10.3
Ancillary income & others 182.7 116.3 57.1 163.1 12.0
Total Revenue 752.2 535.3 40.5 679.6 10.7
EBITDAR 90.5 122.1 (25.9) 72.8 24.3
EBIT (27.4) 57.6 n/a (35.3) (22.3)
Pre-tax profit (50.1) 34.8 n/a (170.4) (70.6)
Tax 0.0 15.1 n/a 39.3 n/a
Reported net profit (50.1) 49.9 n/a (131.0) (61.7)
add back
Non-cash items (gain) / loss 0.0 (5.9) n/a 73.5 n/a
Core Net Income (50.1) 44.0 n/a (57.6) (12.9)
EBITDAR margin (%) 12.0 22.8 -10.8 ppt 10.7 1.3 ppt
Core Net income margin (%) (6.7) 8.2 -14.9 ppt (8.5) 1.8 ppt
Tax rate (%) 0.0 -43.5 43.5 ppt 23.1 n/a
Operating Statistics:
Capacity (ASK million) 6,220 3,885 60.1 6,012 3.5
Passengers carried 1,080,763 647,366 66.9 973,285 11.0
Load factor (%) 85.8 84.2 1.6 ppt 80.5 5.4 ppt
Unit Revenue (MYR / pax) 696.0 826.9 (15.8) 698.2 (0.3)
RASK (sen) 12.1 13.8 (12.2) 11.3 7.0
CASK (sen) 12.9 12.4 4.6 12.1 11.3
CASK - ex fuel (sen) 7.0 6.5 6.6 6.3 11.3
Source: Company, Maybank KE
Things will get better from 3Q14 onwards
2Q14 will also be another loss making quarter, we estimate, as this is
AirAsia X’s seasonally weakest quarter. We are optimistic that the Group
will be profitable from 3Q14 onwards as the market supply-demand has
improved and we have noticed that published fares are much higher than
the same period last year. Furthermore, many of the new route launches
will become mature and start contributing positively to the Group.
May 09, 2014 11
Aviation Sector – 1Q14 Results Preview
INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)
FY Dec 2013A 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F
Revenue 2,307.5 3,437.6 4,294.7 4,992.6 Fixed Assets 2,257 3,825 5,297 6,355
EBITDAR 361.3 591.7 826.7 1,032.5 Other LT Assets 1,237 1,501 1,754 1,858
Depreciation & Amortisation (325.6) (454.5) (457.4) (502.3) Cash/ST Investments 265 64 249 811
Operating Profit 35.7 137.2 369.3 530.2 Other Current Assets 236 248 305 351
Interest (Exp)/Inc (72.5) (89.5) (159.0) (199.2) Total Assets 3,994 5,638 7,605 9,376
Forex and exceptionals - - - -
Pre-Tax Profit (36.8) 47.8 210.3 331.0 ST Debt 486 435 435 435
Tax 126.0 256.5 317.8 345.6 Other Current Liabilities 761 1,132 1,414 1,644
Minority Interest - - - - LT Debt 1,510 2,530 3,686 4,551
Reported Net Profit (87.0) 304.2 528.2 676.6 Other LT Liabilities - - - -
Non-cash items 64.8 (258.1) (318.2) (347.1) Minority Interest - - - -
Core Net Profit (22.2) 46.1 209.9 329.4 Shareholders' Equity 1,237 1,542 2,070 2,746
Total Liabilities-Capital 3,994 5,638 7,605 9,376
Revenue Growth % 17.3 49.0 24.9 16.3
EBITDAR Growth (%) 17.1 63.8 39.7 24.9 Share Capital (m) 2,370 2,370 2,370 2,370
EBIT Growth (%) (27.2) 284.9 169.1 43.6 Net Debt 1,996 2,964 4,121 4,986
Reported Net Profit Grth (%) NA NA 73.6 28.1 Capitalised leases 2,277 2,226 2,008 1,796
Core Net Profit Growth (%) NA (307.8) 355.4 56.9 Working Capital 4,009 5,126 5,880 5,970
Tax Rate % 124.0 (83.8) (60.1) (51.0)
CASH FLOW (MYR m) RATES & RATIOS
FY Dec 2013F 2014F 2015F 2016F
FY Dec 2013F 2014F 2015F 2016F
Profit before taxation (213.0) 47.8 210.3 331.0 EBITDAR Margin % 15.7 17.2 19.2 20.7
Depreciation 139.0 175.1 239.6 290.1 Op. Profit Margin % 1.5 4.0 8.6 10.6
Net interest
receipts/(payments) 72.5 89.5 159.0 199.2 Core Net Profit Margin % (1.0) 1.3 4.9 6.6
Working capital change 194.4 347.8 224.9 183.1 ROE % (2.4) 3.3 11.6 13.7
Cash tax paid 0.4 (1.7) (0.4) (1.6) ROA % (0.7) 1.0 3.2 3.9
Others (incl'd exceptional
items) (2.1) (89.5) (159.0) (199.2) Reported Net Margin % (1.0) 1.3 4.9 6.6
Cash flow from operations 191.2 569.0 674.3 802.6 Dividend Cover (x) NA NA NA NA
Capex (1,069.9) (1,743.4) (1,711.5) (1,347.8) Interest Cover (x) 0.5 1.5 2.3 2.7
Disposal/(purchase) 0.1 - - - Asset Turnover (x) 0.6 0.6 0.6 0.5
Others (238.6) 5.7 65.5 242.6 Asset/Debt (x) 2.0 1.9 1.8 1.9
Cash flow from investing (1,308.5) (1,737.6) (1,646.1) (1,105.2) Debtors Turn (days) 34.2 24.3 24.3 24.3
Debt raised/(repaid) 484.4 1,181.7 1,156.2 865.3 Creditors Turn (days) 54.0 54.0 54.0 54.0
Equity raised/(repaid) 722.7 - - - Inventory Turn (days) >> >> >> >>
Dividends (paid) - - - - Net Gearing (x) 3.2 3.3 2.8 2.2
Interest payments - - - - Debt/ EBITDAR (x) 5.5 5.0 5.0 4.8
Others (50.9) - - - Debt/ Market Cap (x) 1.1 1.7 2.3 2.8
Cash flow from financing 1,156.1 1,181.7 1,156.2 865.3
Change in cash 38.8 13.0 184.5 562.6
Free cash flow (878.8) (1,174.4) (1,037.2) (545.2)
May 09, 2014
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SEE PAGE 15 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)
Malaysian Airlines System (MAS MK)
Share Price: MYR0.22 MCap (USD): 1.1B Malaysia HOLD Target Price: MYR0.22 (+0%) ADTV (USD): 3.8M Aviation (unchanged)
1Q14F: Will be weak 1Q14 result will be out on 15th May. MAS will be loss making
due to a soft market and the impact of MH370 incident.
Management stated that 1Q14 yields were marginally lower
YoY, asserting our view that the cycle has bottomed in 4Q13.
Maintain HOLD with an unchanged target price of MYR0.22.
What’s New
The upcoming 1Q14 results on 15th May will be an inconsequential
event as everyone expects MAS to be loss making. The focus is on
the MH370 incident and the long term implication to the Company,
as well as management’s strategy to bring the Company out of this
muddle.
What’s Our View
This is an exceptionally difficult period for MAS. The MH370
incident has negatively impacted the airline’s reputation and this
greatly inhibits its effort to push for higher yields. Furthermore,
there has not been much clarity over the on-going costs relating to
the MH370 incident. We estimate an out of pocket expense of
MYR60-100k per day for the accommodation and other expenses
for the next of kin of MH370 passengers. It is difficult to make
earnings forecast for 1Q14 under the circumstances, we estimate
MAS will make a core net loss of MYR250-300m, down from a loss
of MYR340m in 1Q13.
Maintain HOLD with an unchanged target price of MYR0.22, which
is based on 0.9x FY14 P/BV, which is its trough valuation for the
past decade. We await the post results analyst briefing and clarity
over the MH370 incident before making any adjustments to our
earnings forecasts and fair value.
Key Data
Shariah status YES
52w high/low (MYR) 0.415/0.2
Free float (%) 29.6
Issued shares (m) 16,711
Market capitalization MYR3.7B
Major shareholders:
KHAZANAH NASIONAL BH
69.4%
EPF 1.0%
Share Price Performance
1 Mth 3 Mth 12 Mth
Absolute (%) 7.3 (26.7) (36.2)
Relative to country
(%)
6.7 (31.0) (41.2)
Maybank vs Market
Positive Neutral Negative
Market Recs 0 2 14
Maybank Consensus % +/-
Target Price (MYR) 0.22 0.18 19.8
2014 Net Profit
(MYR m)
(221) (786) (71.9)
2015 Net Profit
(MYR m)
241 (455) (152.9)
Source: Bloomberg; Maybank
FYE Dec (MYR m) FY12 FY13 FY14F FY15F FY16F Revenue 13,271 14,550 16,907 17,197 17,827 EBITDA 1,664 1,522 2,450 2,795 2,993
Core net profit (523) (1,083) (221) 241 481
Core EPS (sen) (16) (6) (1) 1 3
Core EPS growth (%) (58) (59) (80) (209) 100 Net DPS (sen) - - - - -
BVPS (MYR) 64.3 24.2 22.9 24.4 27.2
Core P/E (x) n/a n/a n/a 14.6 7.3 EV/EBITDA (x) 10.6 10.5 7.8 6.1 5.1
Net dividend (%) - - - - -
P/BV (x) 1.31 0.87 0.92 0.86 0.77 Net debt/equity (%) 344 195 246 204 144
ROAE (%) n/a n/a n/a 6.1 11.1
ROAA (%) n/a n/a n/a 1.0 2.1
Chg in net profit (%) - - - - -
Mohshin Aziz
(603) 2297 8692
1,500
1,575
1,650
1,725
1,800
1,875
1,950
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Feb-12 Aug-12 Feb-13 Aug-13
MAS MK EquityFBMKLCI Index
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May 09, 2014 13
Aviation Sector – 1Q14 Results Preview
NCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)
FY Dec 2013F 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F
Revenue 14,550.0 16,907.3 17,196.7 17,827.2 Fixed Assets 14,615.2 16,329.7 15,547.7 14,458.4
EBITDAR 1,522.0 2,450.4 2,794.5 2,992.8 Other LT Assets 1,354.0 1,354.0 1,354.0 1,354.0
Depreciation & Amortisation (2,082.7) (2,201.6) (2,119.4) (2,107.9) Cash/ST Investments 3,870.6 3,303.6 3,374.6 4,152.9
Operating Profit (560.7) 248.8 675.1 884.9 Other Current Assets 1,990.6 2,507.9 2,545.8 2,589.8
Interest (Exp)/Inc (436.6) (463.4) (434.3) (406.2) Total Assets 21,830.3 23,495.3 22,822.0 22,555.1
Associates 20.4 22.5 24.7 27.2
Exceptional Items 83.8 0.0 0.0 0.0 ST Debt 1,407.3 905.5 403.8 -98.0
Pre-Tax Profit (893.2) (192.1) 265.5 506.0 Other Current Liabilities 6,030.5 6,962.6 7,075.8 7,322.3
Tax (16.1) (29.0) (24.8) (25.3) LT Debt 10,359.3 11,815.1 11,289.7 10,797.4
Minority Interest (4.8) (4.8) (4.8) (4.8) Other LT Liabilities 6.0 6.0 6.0 6.0
Reported Net Profit (1,167.0) (221.2) 240.8 480.7 Minority Interest -24.9 -24.9 -24.9 -24.9
Core Net Profit (1,083.3) (221.2) 240.8 480.7 Shareholders' Equity 4,052.1 3,831.0 4,071.7 4,552.4
Total Liabilities-Capital 21,830.3 23,495.3 22,822.0 22,555.1
Revenue Growth % 9.6% 16.2% 1.7% 3.7%
EBITDAR Growth (%) (8.5%) 61.0% 14.0% 7.1% Share Capital (m) 1,671.1 1,671.1 1,671.1 1,671.1
EBIT Growth (%) 55.3% NA 171.4% 31.1% Net Debt 7,896.0 9,417.0 8,318.9 6,546.4
Net Profit Growth (%) 170.9% (81.0%) NA 99.6% Working Capital (1,576.6) (2,056.6) (1,559.1) (481.5)
Recurring Net Profit Growth
(%)
106.9% (79.6%) NA 99.6% Gross Gearing (%) 194.9 245.8 204.3 143.8
Tax Rate % (1.8%) (15.1%) 9.3% 5.0%
CASH FLOW (MYR m) RATES & RATIOS
FY Dec 2013F 2014F 2015F 2016F
FY Dec 2013F 2014F 2015F 2016F
Pre-Tax Profit (1,167.0) (221.2) 240.8 480.7 EBITDAR Margin (%) 10.5 14.5 16.3 16.8
Dep. & Amort. 2,082.7 2,201.6 2,119.4 2,107.9 EBIT Margin (%) (3.9) 1.5 3.9 5.0
Cash tax paid (176.4) (176.4) (176.4) (176.4) Net Profit Margin (%) (8.0) (1.3) 1.4 2.7
Assoc. & JV Inc/(loss) (757.8) 414.7 75.3 202.5 ROAE (%) (34.9) (5.6) 6.1 11.1
Chg in Wkg.Cap. (8.0) (14.5) (12.4) (12.7) ROA (%) (5.5) (1.0) 1.0 2.1
Other Operating CF (828.2) (778.7) (668.5) (661.3) ROCE (%) (7.4) (1.3) 1.4 2.7
Net Operating CF (854.8) 1,425.5 1,578.2 1,940.6 Div Payout Ratio (%) NA NA NA NA
Capital Exp.(net) (3,660.9) (2,788.5) (307.2) 0.0 Interest Cover (x) NA (0.5) (1.6) (2.2)
Other Invts.(net) 1,187.5 0.0 12.8 12.8 Current Ratio (x) 0.67 0.72 0.75 0.79
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 Quick Ratio (x) 1.86 1.85 1.95 2.11
Div from Assoc & JV 0.0 0.0 0.0 0.0 Net Debt/Equity (X) 1.95 2.46 2.04 1.44
Other Investing CF (27.5) 116.1 99.1 101.2 Debt/EBITDA (x) 7.73 5.19 4.18 3.57
Net Investing CF (2,500.9) (2,672.4) (195.3) 114.0
Div Paid 0.0 0.0 0.0 1.0
Chg in Gross Debt 2,218.1 954.0 (1,027.2) (994.1)
Capital Issues 3,074.8 0.0 0.0 0.0
Other Financing CF (476.3) (463.4) (434.3) (406.2)
Net Financing CF 4,967.6 884.4 (1,096.8) (1,063.7)
Net Cashflow
1,722.1 (567.0) 71.0 778.3
May 09, 2014 14
Aviation Sector – 1Q14 Results Preview
Research Offices
REGIONAL
WONG Chew Hann, CA
Regional Head of Institutional Research
(603) 2297 8686 [email protected]
ONG Seng Yeow
Regional Head of Retail Research
(65) 6432 1453 [email protected]
Alexander GARTHOFF
Institutional Product Manager
(852) 2268 0638 [email protected]
ECONOMICS
Suhaimi ILIAS
Chief Economist
Singapore | Malaysia
(603) 2297 8682 [email protected]
Luz LORENZO
Philippines
(63) 2 849 8836 [email protected]
Tim LEELAHAPHAN
Thailand (662) 658 1420 [email protected]
JUNIMAN
Chief Economist, BII
Indonesia
(62) 21 29228888 ext 29682 [email protected]
Josua PARDEDE
Economist / Industry Analyst, BII
Indonesia
(62) 21 29228888 ext 29695 [email protected]
MALAYSIA
WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure
Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance
LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping
ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional
Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem
YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media
TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos
WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs
LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers
CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure
KANG Chun Ee (603) 2297 8675 [email protected] • Consumer
Ivan YAP (603) 2297 8612 [email protected] • Automotive
LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]
Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]
HONG KONG / CHINA
Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional
Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional
Alison FOK (852) 2268 0630 [email protected] • Consumer
Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer
Karen KWAN (852) 2268 0640 [email protected] • Property & REITs
Osbert TANG, CFA (852) 21 5096 8370 [email protected] • Transport & Industrials
Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy
Simon QIAN, CFA (852) 2268 0634 [email protected] • Telecom & Internet
Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials
Warren LAU (852) 2268 0644 [email protected] • Technology – Regional
William YANG (852) 2268 0675 [email protected] • Technology – Regional
INDIA
Jigar SHAH Head of Research
(91) 22 6623 2601
• Oil & Gas • Automobile • Cement
Anubhav GUPTA
(91) 22 6623 2605
• Metal & Mining • Capital Goods • Property
Urmil SHAH
(91) 22 6623 2606 [email protected]
• Technology • Media
SINGAPORE
NG Wee Siang Head of Research (65) 6432 1467 [email protected] • Banking & Finance
Gregory YAP (65) 6432 1450 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos
Wilson LIEW (65) 6432 1454 [email protected] • Property Developers
ONG Kian Lin (65) 6432 1470 [email protected] • S-REITs
James KOH (65) 6432 1431 [email protected] • Consumer - Regional
YEAK Chee Keong, CFA (65) 6432 1460 [email protected] • Offshore & Marine
Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)
WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips
John CHEONG (65) 6432 1461 [email protected] • Small & Mid Caps • Healthcare
INDONESIA
Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy
Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance
Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property
Anthony YUNUS (62) 21 2557 1136 [email protected] • Consumer • Poultry
Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement
Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport
Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail
Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected] • Telcos • Media
PHILIPPINES
Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy
Laura DY-LIACCO (63) 2 849 8840 [email protected] • Utilities • Conglomerates • Telcos
Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement
Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics
Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction
Ramon ADVIENTO (63) 2 849 8845
[email protected] • Mining
THAILAND
Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials
Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services
Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate
Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector
Sukit UDOMSIRIKUL Head of Retail Research
(66) 2658 6300 ext 5090 [email protected]
Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy
Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy
Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel
Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce
Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem
Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property
Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] • Banking & Finance
Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap
Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics
VIETNAM
LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities
THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 [email protected] • Real Estate • Construction • Materials
TRUONG Thanh Hang (84) 844 55 58 88 x 8085 [email protected] • Consumer
Le Nguyen Nhat Chuyen (84) 844 55 58 88 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research
(84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking
NGUYEN Trung Hoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 [email protected] • Macro • Steel • Real estate
TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction
TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas
PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery
NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical
• Food & Beverage
May 09, 2014 15
Aviation Sector – 1Q14 Results Preview
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate
and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than
the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank
Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking
statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit
business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only
under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the
perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the
Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You
should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any
responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.
May 09, 2014 16
Aviation Sector – 1Q14 Results Preview
Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.
Singapore: As of May 09, 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph
16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of May 09, 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in
issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.
OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable
of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.
Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL Return is expected to be below -10% in the next 12 months (excluding dividends)
Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.
DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng
Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange
Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank
KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.
May 09, 2014 17
Aviation Sector – 1Q14 Results Preview
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