In fact, the low-cost carrier briefly surpassed MAS’ market capitalisation in intra-day trading yesterday, when its shares rose to a high of RM2.73. At that price, it had a market capitalisation of RM7.55 billion. However, the stock later pared its earlier gains to close unchanged at RM2.58 with 11.92 million shares traded. Shares of MAS, meanwhile, closed five sen higher at RM2.27.
At yesterday’s closing prices, AirAsia had a market capitalisation of RM7.14 billion compared to MAS’ RM7.59 billion.
Shares of AirAsia have surged 87% year-to-date while that of MAS gained only 2.6% in the same period.
The success of the low-cost airline versus the national carrier is a major feat for an airline effectively born just nine years ago, acquired for a token sum of RM1 and
driven by a former music executive turned aviation entrepreneur.
AirAsia’s story effectively began in December 2001, when its CEO Datuk Seri Tony Fernandes acquired the ailing airline from DRB-Hicom for a token sum of RM1. The original airline, set up by DRB-Hicom in 1996, had just two aircraft, a limited route network and came with nearly RM40 million in debts after the Asian financial crisis.
AirAsia was relaunched in January 2002 with regional fares starting from as low as RM1. It was first based out of Kuala Lumpur with additional hubs later in Jakarta and
Bangkok through sister companies Indonesia AirAsia and Thai AirAsia.
Today, the airline has a fleet of 96 aircraft and flies to over 20 countries. AirAsia has certainly come a long way. Its financial performance and share price have fared well. But is there more upside, and can it overtake MAS?
According to analysts, the share price surge is not a surprise considering its strong earnings, a good expansion model and the growing regional budget airlines market.
Some analysts reckon it is only a matter of time for AirAsia to surpass MAS in terms of market capitalisation. “AirAsia is poised to capitalise on the growing regional market for low-cost carrier while the market for business travellers has been stagnant. AirAsia surpassing MAS (in terms of market capitalisation) is no surprise at all,” he said.
He noted that AirAsia’s earnings continued to grow in the past few quarters, while MAS has been making losses due to its fuel hedging policies. For the 1HFY10 ended June 30, AirAsia’s net profit grew 23.5% year-on-year to RM423 million or 15.3 sen per share, on revenue of RM1.82 billion. In comparison, MAS posted a loss of RM224.68 million on the back of RM6.51 billion in revenue for the same period.
“Unless the Economic Transformation Programme takes off and transforms Kuala Lumpur into a financial hub, you will not see many business travellers here. But, the budget airline market is really growing in the region,” he said.
“They have been listening to investors’ concerns that AirAsia was over-gearing in its expansion plans. They have since done placement exercises to address their borrowings and also deferred the delivery of its new aircraft. This has really helped improved investors’ sentiment on the counter,” he said.
The budget airline recently announced its operating statistics for 3QFY10, which had led to some bullish calls by investors.
Its indicative 3QFY10 statistics saw revenue passengers-kilometre (RPK) or passenger traffic increasing 26.6% from a year earlier, while the load factor grew to 78% from 75%. The airline had carried four million passengers or 12.4% more than the same period a year ago.
An analyst noted that September was a bumper quarter in terms of traffic due to more holiday travels during the Hari Raya period.
“At the same time, we expect an increase from its ancillary income such as the new call centre services,” she said, adding that 3Q net profit would most likely meet its estimated target of RM137 million, up 5.3% from last year.
Despite the strong indicative results, some analysts remain cautious about its earnings for the quarter. “AirAsia has always been releasing its preliminary operating statistics for everyquarter. But the numbers only tell half of the story as what is most important is the yield factor,” an analyst said.
The analyst, however, said he expected AirAsia to post better 3Q results with yield improving to 30% or 40%.
“The third quarter should be better and within our expectations. As for the improving share price, I believe it is mostly driven by anticipation of its upcoming listing of AirAsia X and the overseas operations, apart from the good operational statistics,” he added.
“The weakening US dollar would not necessarily improve profit margins as it could be offset by rising fuel prices and maintenance works that are denominated in US dollars,” he said.
i still prefer MAS, if they are cheap :)
ReplyDeleteFor sure if i have money i will fly with MAS. That is why AirAsia is a budget flight.
ReplyDelete