TRANSPORTATION & LOGISTICS AIRASIA

TRANSPORTATION & LOGISTICS

AIRASIA

(AAGB MK EQUITY, AIRA.KL)

9 Sep 2021

Focusing on shoring up liquidity

SELL

Company report

(Maintained)

AmInvestment Bank

.my

Rationale for report: Company results/update

03-2036 2240

Price

Fair Value

52-week High/Low

RM0.95

RM0.62

RM1.27/RM0.51

Investment Highlights

Key Changes

Fair value

EPS

?

?

YE to Dec

FY20

Revenue (RM mil)

Core net profit (RM mil)

FD Core EPS (sen)

FD Core EPS growth (%)

Consensus Net Profit (RM mil)

DPS (sen)

PE (x)

EV/EBITDA (x)

Div yield (%)

ROE (%)

Net Gearing (%)

FY21F

FY22F

FY23F

3,141.1 1,569.6

(3,709.9) (3,457.3)

(111.0)

(88.7)

(1,319.9)

(14.6)

(5,096.7) (2,081.6)

0.0

0.0

nm

nm

nm

nm

0.0

0.0

nm

nm

nm

nm

5,136.5

109.5

2.8

nm

(517.3)

0.0

33.6

69.6

0.0

nm

nm

8,691.0

287.3

7.4

162.3

163.3

0.0

12.8

33.3

0.0

nm

nm

Stock and Financial Data

Shares Outstanding (million)

Market Cap (RM mil)

Book Value (RM/share)

P/BV (x)

ROE (%)

Net Gearing (%)

3,898.1

3,683.7

(0.6)

nm

nm

nm

Major Shareholders

Tune Air Sdn Bhd (13.3%)

Tune Live Sdn Bhd (13.1%)

Positive Boom Ltd (8.5%)

65.1

10.4

Free Float

Avg Daily Value (RM mil)

Price performance

3mth

6mth

12mth

Absolute (%)

Relative (%)

(0.6)

(1.6)

(0.7)

43.2

36.2

5.0

2,000

4.5

1,800

4.0

1,600

3.5

1,400

3.0

1,200

2.5

1,000

2.0

800

1.5

600

1.0

400

0.5

200

0.0

Sep-16

0

Sep-17

Sep-18

AAGB MK

Sep-19

Sep-20

FBMKLCI Index

?

We maintain our forecasts and fair value (FV) of RM0.62 for

AirAsia based on 8x FY23F EPS. This is at a discount to its

global peers, Ryanair and Southwest Airlines (9x¨C11x

forward PE) to reflect weaker recovery prospects for the

air travel industry in this part of the world vs. the US and

Europe (that have had more success in their vaccination

programmes) apart from AirAsia¡¯s relatively smaller size

and a damaged balance sheet. Our FV has been adjusted

for a 3% premium to reflect a 4-star ESG rating for AirAsia

as appraised by us (Exhibit 5). Maintain SELL.

?

We consider AirAsia¡¯s 1HFY21 core net loss of RM1.43bil

within our full-year net loss forecast of RM3.46bil but

below the full-year consensus estimates of a RM2.01bil net

loss.

?

AirAsia's 1HFY21 revenues dived by 72% YoY on the back

of an 85% contraction in revenue passenger kilometres

(RPK) amidst travelling restrictions and low demand due

to the pandemic. The passengers carried plunged 83%

YoY to 1.7mil vs. 10.1mil previously. Correspondingly, its

capacity contracted by 80% YoY. Prior to the pandemic,

AirAsia carried 25.4mil passengers in 1HFY19.

?

In terms of cost, AirAsia managed to reduce its fixed costs

by 44% YoY (and flat QoQ), coming largely from staff cost

(headcount reduction and voluntary pay cuts -57% YoY)

and fixed maintenance costs via asset optimisation (-46%

YoY). These were partly offset by an increase in critical IT

operations costs in 2QFY21.

?

AirAsia has also completed two batches of lease

restructuring in 3QFY21, and will complete the full

restructuring exercise by the end of FY21. This will result

in lower leasing rates moving forward.

?

We believe AirAsia is on track to raise RM2bil¨CRM2.5bil

fresh funds from a combination of new equity and debt. To

recap, thus far, AirAsia has shored up its liquidity by: (1) a

private placement of 470.2mil new shares or 14% of its preexercise share base at an issue price of RM0.675 (for the

first tranche) and RM0.865 (for the second tranche),

raising proceeds of about RM336mil in total; (2) effecting

the sale and leaseback and sale of two engines; (3)

divestment of Fly Leasing, raising proceeds of US$56.8mil

(equivalent to RM236.0mil).

AirAsia

9 Sep 2021

?

Other funding plans that are in progress include: (1) raising RM1bil debt through the Danajamin scheme, of which

AirAsia has already obtained approval letters from two banks and is in discussion with other financial institutions. It

is confident of obtaining the funds by the end of the year; (2) raising up to RM1bil via a renounceable rights issue,

subject to Bursa Malaysia and shareholders¡¯ approval; (3) raising new capital for its digital businesses. Already,

BigPay has secured investment of up to US$100mil (equivalent to RM415mil) in the form of convertible loan notes

from SK Group, a South Korean conglomerate.

?

While the prospects for the air travel industry and airlines have improved significantly following the large-scale rollout

of Covid-19 vaccines globally, AirAsia's operations are once again hit by the resurgence in Covid-19 cases both locally

and regionally. Depending on how soon Malaysia and the world at large could emerge from the pandemic, AirAsia

may need to raise more fresh capital, including potentially a debt-to-equity swap for creditors (that is also highly

dilutive to its existing shareholders) to ensure its long-term survival.

EXHIBIT 1: RESULTS SUMMARY

Source: company, AmInvestment Bank

AmInvestment Bank Bhd

2

AirAsia

9 Sep 2021

EXHIBIT 2: OPERATING STATISTICS

FYE Dec

(RM mil)

Passengers Carried (mil)

Capacity

Load Factor (%)

RPK (mil)

ASK (mil)

Number of flights

Average stage length (km)

Aircraft - end of period

Average Fare (RM)

Unit Passenger Rev (RM)

Rev/ASK (sen)

Cost/ASK (sen)

Cost/ASK-ex Fuel (sen)

Fuel Consumed (Barrels)

Average Fuel Price (US$/Barrel)

FY19

2Q

FY20

1Q

0.2

0.3

59

232

391

1,868

1,121

149

239

78

15.93

295.65

230.76

83,336

764

1.0

1.5

67

888

1,329

8,036

906

149

159

204

15.03

72.75

64.97

230,043

78

FY20

2Q

YoY

Chg

-22%

-24%

100

-13%

-14%

-24%

13%

0.8

1.1

68

775

1,149

6,114

1,026

151

194

124

15.93

76.51

70.37

190,797

90

FY19

6M

FY20

6M

10.1

13.1

77%

11,388

14,784

71,650

1,121

149

210.5

151.5

15.63

157.73

122.26

2,468,632

425

0

22%

-39%

6%

5%

8%

-17%

15%

1.7

2.6

67%

1,663

2,478

14,150

966

151

177

164

15.48

74.63

67.67

420,840

84

YoY

Chg

-83%

-80%

-10%

-85%

-83%

-80%

-14%

2

-16%

8%

-1%

-53%

-45%

-83%

-80%

Source: company, AmInvestment Bank

EXHIBIT 3: PB BAND CHART

EXHIBIT 4: PE BAND CHART

9.00

2.50

8.00

2.00

7.00

+1¦Ä

6.00

1.50

+1¦Ä

5.00

Avg

4.00

1.00

Avg

3.00

-1¦Ä

2.00

0.50

1.00

-1¦Ä

Jul-21

Apr-21

Jan-21

Jul-20

Oct-20

Apr-20

Jan-20

Jul-19

Oct-19

Apr-19

Jan-19

Jul-18

Oct-18

Apr-18

Jan-18

Jul-17

Oct-17

Apr-17

0.00

Jan-17

Jul-21

Apr-21

Jan-21

Jul-20

Oct-20

Apr-20

Jan-20

Jul-19

Oct-19

Apr-19

Jan-19

Jul-18

Oct-18

Apr-18

Jan-18

Jul-17

Oct-17

Apr-17

Jan-17

0.00

EXHIBIT 5: ESG RATING

Overall

¡ï

¡ï

¡ï

¡ï

Zero-carbon initiatives

¡ï

¡ï

¡ï

¡ï

Pollution control

¡ï

¡ï

¡ï

Sustainable industrialization

¡ï

¡ï

¡ï

¡ï

Diversity and inclusion

¡ï

¡ï

¡ï

¡ï

Employees welfare

¡ï

¡ï

¡ï

Corporate social responsibilities

¡ï

¡ï

¡ï

¡ï

Accessibility & transparency

¡ï

¡ï

¡ï

¡ï

Supply chain auditing

¡ï

¡ï

¡ï

We accord a discount/premium of -6%, -3%, 0%, +3% and + 6% on fundamental fair

value based on the overall ESG rating as appraised by us, from 1-star to 5-star

AmInvestment Bank Bhd

3

AirAsia

9 Sep 2021

DISCLOSURE AND DISCLAIMER

EXHIBIT 6: FINANCIAL DATA

This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (¡°AmInvestment¡±) without

regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty,

representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy

or sell any real estate, securities, stocks, foreign exchange, futures or investment products. AmInvestment recommends that

you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial,

Source:

Company,

AmInvestment

Bhd estimates

legal or other advice on the appropriateness of the

particular

investment

orBank

strategy.

The information in this report was obtained or derived from sources that AmInvestment believes are reliable and correct at the

time of issue. While all reasonable care has been taken to ensure that the stated facts are accurate and views are fair and

reasonable, AmInvestment has not independently verified the information and does not warrant or represent that they are

accurate, adequate, complete or up-to-date and they should not be relied upon as such. All information included in this report

constitute AmInvestment¡¯s views as of this date and are subject to change without notice. Notwithstanding that, AmInvestment

has no obligation to update its opinion or information in this report. Facts and views presented in this report may not reflect the

views of or information known to other business units of AmInvestment¡¯s affiliates and/or related corporations (collectively,

¡°AmBank Group¡±).

This report is prepared for the clients of AmBank Group and it cannot be altered, copied, reproduced, distributed or republished

for any purpose without AmInvestment¡¯s prior written consent. AmInvestment, AmBank Group and its respective directors,

officers, employees and agents (¡°Relevant Person¡±) accept no liability whatsoever for any direct, indirect or consequential

losses, loss of profits and/or damages arising from the use or reliance of this report and/or further communications given in

relation to this report. Any such responsibility is hereby expressly disclaimed.

AmInvestment is not acting as your advisor and does not owe you any fiduciary duties in connection with this report. The

Relevant Person may provide services to any company and affiliates of such companies in or related to the securities or

products and/or may trade or otherwise effect transactions for their own account or the accounts of their customers which may

give rise to real or potential conflicts of interest.

This report is not directed to or intended for distribution or publication outside Malaysia. If you are outside Malaysia, you should

have regard to the laws of the jurisdiction in which you are located.

If any provision of this disclosure and disclaimer is held to be invalid in whole or in part, such provision will be deemed not to

form part of this disclosure and disclaimer. The validity and enforceability of the remainder of this disclosure and disclaimer will

not be affected.

AmInvestment Bank Bhd

4

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