Restarting engines
Maintain BUY with a revised TP of MYR1.29 (-2%)
4Q21/FY21 net loss was within our expectations. While 4Q21 net loss was wider QoQ, it was necessary to resume flights. This year ought to be better as Malaysia will welcome international travellers soon. We narrow our FY22E net loss by 24% but our FY23E net profit is little changed; we also introduce FY24E. Our SOP-based TP is trimmed a tad by 2% to MYR1.31 from MYR1.29. Maintain BUY. On another note, Capital A has hired 2 financial institutions to regularise its PN17 status.
Results within our expectations
4Q21 core net loss of MYR857.7m (-22% YoY, +27% QoQ) brought FY21 core net loss to MYR2.84b (-19% YoY) which was within our expectations, at 103% of our FY estimate. Note that while 4Q21 revenue surged 142% QoQ as Malaysia permitted interstate travel from 11 Oct 2021, 4Q21 core net loss widened 27% QoQ as aircraft coming out of hibernation underwent maintenance checks and incurred higher maintenance costs. In the long term, we opine that maintenance costs will normalise.
FY22E ought to be better, in our view
Despite the recent Omicron wave, the Malaysian government will reopen its international borders soon, thanks to its high vaccination rate. This is important to Malaysia AirAsia (MAA) which has historically contributed c.80% to group earnings. Passengers carried on international flights accounted for 46% of MAA’s FY19 passengers carried. To be sure, the recovery in international passenger traffic will likely be gradual due to the high cost of PCR testing pre- and post-travel.
Narrowing FY22E net loss by 24%
Our FY22E/FY23E revenue and EBITDA are unchanged. Yet, we narrow FY22E net loss by MYR758.4m. Following 45%-owned Thai AirAsia’s (TAA) injection into Asia Aviation (AAV TB, CP: THB2.52, Not Rated), Capital A need not recognize its share of TAA’s previously unrecognized losses which we quantified at MYR1.14b for FY22E. Instead, Capital A will recognize its share of AAV’s FY22E net loss which we estimate at MYR378.5m. We trim FY23E net profit by only MYR4.6m on slightly higher interest expense. On that note, we introduce FY24E estimates.