Airasia- the recovery begins?

Airasia has just announced its results for 1Q2009 ended 31/3/2009. Despite a q-o-q 13.8%-drop in its turnover from RM828 million to RM714 million, Airasia managed to turnaround from a net loss of RM177 million in 4Q2008 to report a net profit of RM203 million in 1Q2009. This is because Airasia suffered an exceptional loss of RM426 million in 4Q2008 due to the cost of unwinding fuel derivative & interest rate swaps. For FY2008, Airasia suffered exceptional losses totaling RM1.069 billion from the same sources as well as the loss of collateral held by the now-defunct Lehman Brothers.


Table 1: Airasia's 8Qs

Table 2 below revealed that Airasia's Load Factor of 70% for 1Q2009 is lower 1Q2008 (of 72%) or 4Q2008 (of 78.4%). Despite the drop in Load Factor & Average Fare (from RM229 in 4Q2008 to RM198 in 1Q2009), Airasia was able to increase its EBITDAR margin from 42.6% in 4Q2008 to 44.1% in 1Q2009. As a result, it was able to maintain its Core Operating Profit margin at about 23%.


Table 2: Airasia's Key Statistics for 1Q2009, 4Q2008 & 1Q2008

Looking at Chart 1 below, we can see the steady growth in Airasia's turnover, which reflects its aggressive expansion program. Its profits track record was unable to keep up with its turnover growth due to exceptional items, as mentioned earlier.


Chart 1: Airasia's past 12-quarters' turnover & profits

Airasia has broken above the strong horizontal resistance of RM1.25-26 in the past few days. The next resistance will be at RM1.40 and thereafter at RM1.50 & RM1.60.


Chart 2: Airasia's weekly chart as at 28/5/2009 (Source: Quickcharts)

Based on improving performance & mildly bullish technical outlook, Airasia could be a good trading BUY.