AirAsia Bhd (Aug 19, RM1.73)
Reiterate buy at RM1.68 revised target price RM2.32 (from RM1.67): AirAsia’s 2Q2010 financial results came in above our expectations due to lower than expected interest expenses. Revenue for the quarter rose 25.8% year-on-year (y-o-y) to RM940.7 million as a result of higher passenger volume as well as higher ancillary income, indicating a recovery in demand for air travel. This led to an increase in adjusted net profit (excluding deferred taxes and MTM derivative gain/loss) by 27% y-o-y to RM164.6 million, bringing year-to-date total to RM271.6 million. This hits 55% of our FY2010 estimates of RM492 million.

Ticket sales were up 20% on a y-o-y basis to RM673 million due to higher traffic and additional capacity from the two new aircraft delivered in 2Q2010. Available seat per kilometre (ASK) improved 9% y-o-y to 5.94 billion while revenue passenger kilometres (RPK) rose 15% y-o-y to 4.32 billion. Seat load factor inched up 2.2 percentage points y-o-y to 76.9% due to enhanced flight frequencies and addition of new routes. Revenue yield crept up 10% y-o-y to 22 sen per RPK.

Cost per ASK (CASK) increased 21% y-o-y to 11.7 sen/ASK as jet fuel prices shot up by almost 60% to US$100 per barrel during the quarter. However, it remained flat quarter-on-quarter. Apart from that, other costs seem to be under control as non-fuel CASK was up by a mere 5% y-o-y to 6.3 sen/ASK.