Traffic recovery underway but oil prices high
? 1Q22 core net loss of RM1bn was broadly in line at 37% of our FY22F loss
forecast (65% of consensus) as future quarters’ losses should narrow.
? Malaysia reopened its borders to quarantine-free international travel from 1
Apr and AirAsia’s 2Q22F passenger traffic numbers should jump sequentially.
? Nevertheless, we reiterate Reduce on valuation grounds, with our TP lowered
to 18 sen, still based on end-CY22F P/RNAV of 1x.
Still-significant RM1bn quarterly loss in 1Q22…
CapA reported its ninth consecutive quarterly core loss in 1Q22 of RM1bn as travel
demand remained weak, albeit on a recovering trend; 4Q21’s core net loss was also at
RM1bn. The good news is that airline revenues rose 30% qoq on the back of higher
demand, although this was largely consumed by higher all-in jet fuel prices of US$115/bbl
in 1Q22 vs. US$95/bbl in 4Q21. Still, we calculate that the airline EBITDA loss narrowed
slightly from 4Q21’s RM310m to 1Q22’s RM265m. This improved qoq performance was
offset by higher EBITDA losses at its digital businesses, with the AirAsia Superapp still
building momentum in its online travel agency (OTA), e-hailing and food delivery
segments. CapA’s 45% associate Thai AirAsia also reported a wider qoq loss in 1Q22.
… but losses should narrow with international borders reopened
Looking forward into the 2Q22F, we expect travel demand to pick up considerably as
Malaysia reopened its international borders to quarantine-free travel from 1 Apr 2022.
Based on statistics from Malaysia Airports, the klia2 terminal, where AirAsia is based,
saw international traffic rise from Mar’s 54k to Apr’s 146k passengers, representing a
modest 8% of the pre-pandemic Apr 2019 base but with significant upside potential.
Meanwhile, domestic traffic at klia2 recovered to 52% of the pre-pandemic base in Mar,
disregarding the drop to 38% in Apr due to Ramadan. In Malaysia, AirAsia plans to raise
its operational fleet 2.3x from 34 aircraft in 1Q22 to 78 planes in 4Q22F in order to take
advantage of the demand recovery. The air cargo business under Teleport should also
grow by riding on the bellyhold of the passenger flights while AirAsia Superapp’s OTA
segment should be able to leverage on broad recovery in travel demand.
Lofty share price difficult to justify
Despite the positive revenue momentum that we expect to materially reduce CapA’s core
net losses in FY23-24F, we do not think the share price has derated enough considering
its negative BVPS of RM1.04 at end-Mar 2022, which we believe will widen to negative
RM1.38 by end-FY22F. Since the Covid-19 pandemic began in 1Q20, CapA has reported
RM10.6bn in cumulative core net losses. CapA’s digital businesses remain in investment
mode and we lack the confidence to attribute them significant equity values given that its
competitors in the space remain in the red. Meanwhile, jet fuel prices have risen further to
US$133/bbl so far this 2Q22F, with the US$ trading at RM4.40 now from just RM4.20 at
end-Mar; these will put pressure on CapA’s cost structure. We will keep an eye out for
possibly stronger-than-expected demand and yield recovery in future quarters