AirAsia Bhd is truly one of the most incredible and inspiring success stories in Malaysia. Beginning with 2 aircrafts in 2001, AirAsia Bhd is currently the leading low-cost carrier in the world, serving over 110 destinations from 20 hubs in Malaysia, Thailand, Indonesia, the Philippines, and India. As I write, AirAsia Bhd is worth RM 14.0 billion in market capitalization.

In this article, I’ll list down 8 key things you need to know about AirAsia Bhd before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: AirAsia / KLSE: 5099
Market Capitalization: RM 14.0 Billion (5 February 2018)

Share Price: RM 4.19 (5 February 2018)

Industry: Airline

Syariah Compliant: Nope

#2: Growth Story

Carrying More Passengers

As a group, AirAsia Bhd has doubled its fleet size from 90 aircrafts in 2010 to 188 aircrafts in 2017. The airline has grown the number of passengers carried from 25.7 billion in 2010 to 63.4 billion in 2017. AirAsia Bhd has maintained a stable load factor of 78% – 80% from 2010 to 2015 and has recorded a notable increase in load factor to 87% and 88% for the year 2016 and 2017 respectively.

 

Source: Operating Statistics of AirAsia Bhd


Source: Operating Statistics of AirAsia Bhd

#3: Financials

Here are the key highlights of AirAsia Bhd’s financial results since 2010:

Higher Revenue

Overall, AirAsia Bhd has achieved consistent growth in revenue over the last 6 – 7 years. This was in line with its continuous growth in passengers carried and stable average fare and ancillary income per passenger during the period. Quarterly revenue has grown from RM 870.6 million in Q1 2010 to RM 2.45 billion in Q3 2017.

Erratic Profits

AirAsia Bhd has delivered unpredictable patterns of earnings since 2010. The airline has incurred losses of RM 428.5 million and RM 405.7 million in two quarters: Q4 2014 and Q3 2015. They were the biggest losses reported during the 6 – 7 year period. In Q4 2014, AirAsia Bhd had incurred RM 647.6 million in foreign exchange loss. Meanwhile, in Q3 2015, AirAsia Bhd has incurred a total of RM 625.0 million in losses from its stake in Indonesia AirAsia.

On the positive note, AirAsia Bhd has reported RM 877.8 million in profits in Q1 2016, the largest reported over the 6 – 7 year period. This is due to having reported a RM 651.6 million in foreign exchange gain in that period.

Thus, AirAsia Bhd is subjected to multiple risks that would impact its level of profitability. They include foreign exchange gains or losses, movements in oil prices, labour costs, maintenance & overhaul expenses, finance expenses, and income tax expenses respectively.

Source: Quarterly Reports of Airasia Bhd

Source: Quarterly Reports of Airasia Bhd

#4: Balance Sheet Strength

As at 30 September 2017, AirAsia Bhd has reported having RM 9.27 billion in long-term borrowings. Its debt-to-equity ratio is 109.54%. Hence, it is likened to one who has RM 109.54 in long-term debt for every RM 100 he owns.

Also, AirAsia Bhd has reported RM 4.55 billion in current assets and RM 5.34 billion in current liabilities. Thus, its current ratio is 0.85. This is similar to a person having savings equivalent to 10 months’ worth of living expenses.

#5: Future Prospects

Here are the key highlights of AirAsia Bhd’s future prospects:

Forward Booking
From the Q3 2017 Presentation Slide, AirAsia Bhd has forecasted stable load factor of 85%, 87% and 85% for the first 3 months of 2018. The load factor is expected to be higher in February 2018 due to Chinese New Year.

500 Aircrafts by 2027

From the Q3 2017 Press Release, AirAsia Bhd is planning to increase its fleet size to 500 aircrafts by 2027, up from 188 aircrafts in 2017. This works out to be an increment of 30 aircrafts on average per year for the next 10 years. The fleet expansion is intended to cater to the ongoing boom in air travel within the ASEAN region.

Partnership with SATS Ltd

AirAsia Bhd is forming a joint venture partnership with SATS Ltd to set up a company known as Ground Team Red Sdn Bhd (GTR). It will take over the ground handling services for all stations in Malaysia and Singapore. AirAsia Bhd expects to reduce its aircraft turnaround costs by 16% in the first year of its operations.

AirAsia Global Bhd

From the Q3 2017 Presentation Slide, AirAsia Bhd is proposing on an internal reorganization to reflect the diversity of the group’s business operations. The proposed structure consists of 4 main segments:

  1. Air Transportation
    This includes AirAsia Malaysia, AirAsia Japan, Indonesia AirAsia, Thai AirAsia, Philippines AirAsia, AirAsia India, AirAsia Pte Ltd and coming in the pipeline: AirAsia Vietnam and AirAsia China.  
  2. Leasing Division
    This includes Airasia Aviation Capital Ltd, Airasia Mauritius Ltd, and Asia Aviation Capital Pte Ltd.  
  3. Digital Business
    This includes Red Ventures Sdn Bhd which is involved in Redtix, BIG Loyalty, ROKKI.com Shop, ROKKI, Travel3sixty, AirAsia Go Holiday Sdn Bhd, Big Pay Pte Ltd, Big Data for Humans APAC Ltd and AAE Travel Pte Ltd.  
  4. Support Division
    This includes GTR, Redbox, AirAsia Corp. Services, AGSS Sdn Bhd, T & CO Coffee Sdn Bhd, and T & CO Cafe Sdn Bhd.

#6: Valuation

As I write, AirAsia Bhd is trading at RM 4.19 a share.

As at 30 September 2017, AirAsia Bhd has reported having RM 1.86 in net asset value a unit. Thus, its current P/NAV works out to be 2.25.

AirAsia Bhd has failed to deliver sustainable profits over the last 5 years. As such, it is less meaningful to calculate its P/E Ratio. In 2016, AirAsia Bhd has declared and paid out RM 0.12 in dividends per share (DPS) to its investors. Thus, if AirAsia Bhd is able to maintain its DPS, then, its expected dividend yields is 2.86%.

#7: Investors Relation

For further enquiries or to request for additional investment information on AirAsia Bhd’s Investors Relation matters, you may contact:

Email:

maa_ir@airasia.com

Investor Relations (IR) TV:

https://www.airasia.com/my/en/about-us/ir-tv.page

Website: https://www.airasia.com/my/en/about-us/investor-relations-contacts.page

#8: Major Shareholders

The substantial shareholders of AirAsia Bhd with their latest shareholdings as at 20 March 2017 are as followed:

– Tune Live Sdn Bhd: 16.73% (Direct)

– Tune Air Sdn Bhd: 15.45% (Direct)

– Datuk Kamarudin bin Meranun: 0.05% (Direct)

– Tan Sri Dr. Anthony Francis Fernandes: 0.06% (Direct)

– Employees Provident Fund Board: 5.12%

Note:

Datuk Kamarudin Bin Meranun and Tan Sri Dr. Anthony Francis Fernandes are major shareholders of both Tune Live Sdn Bhd and Tune Air Sdn Bhd. Thus, they have 32.18% indirect shareholdings in AirAsia Bhd in addition to their respective direct shareholdings in AirAsia Bhd.

Tan Sri Dr. Anthony Francis Fernandes is made the Group CEO while Datuk Kamarudin bin Meranun is appointed as Executive Chairman of AirAsia Bhd.

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