PP 7767/09/2010(025354)

5 August 2010
RHB Research
Malaysia Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New s Upda te
5 August 2010
MARKET DATELINE

AirAsia Share Price

Fair Value
:
:
RM1.51
RM1.88
New Aircraft Delivery In FY12/11 Reduced Further Recom : Outperform
(Maintained)
From 15 to 8

Table 1 : Investment Statistics (AIRASIA; Code: 5099) Bloomberg: AIRA MK

Net Net
FYE Turnover Profit# EPS# Growth PER C.EPS* P/CF P/NTA ROE Gearing NDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%) (%)
2009 3,178.9 449.1 18.3 >100 8.3 - (3.6) 1.4 16.9 2.6 0.0
2010f 3,399.5 430.6 15.5 (15.3) 9.7 20.0 (3.5) 1.4 13.9 2.7 0.0
2011f 3,735.3 546.3 19.7 26.9 7.7 23.0 (4.0) 1.2 15.0 2.8 0.0
2012f 4,067.9 630.7 22.7 15.4 6.7 27.0 (4.7) 1.0 14.8 2.7 0.0
Main Market Listing/Non Trustee Stock /Non Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES

♦ Only 8 new aircraft in FY12/11. AirAsia is cutting new aircraft delivery in

Issued Capital (m shares) 2,759.6
FY12/11 for a second time. It has signed another amendment agreement
Market Cap (RMm) 4,167.0
with manufacturer Airbus SAS to reschedule the delivery of seven A320 from Daily Trading Vol (m shs) 6.3
Mar-Oct 2011 to Apr-Nov 2015, reducing new aircraft delivery in FY12/11 to 52wk Price Range (RM) 1.11-1.53
eight from 15. AirAsia said that no penalties are payable arising from the Major Shareholders: (%)
deferment. Recall, in Oct 2009, new aircraft delivery in FY12/11 was first Tune Air 26.4
reduced to 15 from 25 originally with the deferment of eight A320 from Feb- Capital World 9.0
Dec 2011 to Sep 2014 – Oct 2015. Based on the revised new aircraft EPF 8.7

delivery schedule, we now project AirAsia’s fleet size to only increase from
FYE Dec FY10 FY11 FY12
84 (A320 x 74 & B737 x 14) as at end-1QFY12/10 to 94 (entirely A320) as at EPS Revision (%) - - -
end-FY12/11, vis-à-vis 101 (entirely A320) previously. Var to Cons (%) -23 -15 -16

♦ We believe the lower aircraft delivery in FY12/11 will not materially affect PE Band Chart
AirAsia’s growth plan in Malaysia. Despite the lower aircraft delivery, we
believe a 12.5% per annum growth in available seat km (ASK) in Malaysia PER = 16x
we assume is still achievable. We believe the lower aircraft delivery will PER = 12x
PER = 8x
affect more on the expansion plans of associates Thai AirAsia and Indonesia
AirAsia.
♦ Forecasts. Maintained as lower interest cost (on reduced capex) and
depreciation (on a smaller fleet) will be offset by lower aircraft lease
payments receivable from associates.
Relative Performance To FBM KLCI
♦ Risks to our view. These include: (1) Recovery in the air travel sector fails
to sustain; (2) Higher jet fuel cost; and (3) Outbreaks of pandemic diseases.
FBM KLCI
♦ Maintain Outperform. We believe the airline sector is poised for improved
prospects over the medium term in line with the recovery in the global
economy. AirAsia is an attractive proxy, particularly, given that it has also
finally done the right things such as: (1) To start delivering more consistent AirAsia

earnings; (2) To adopt a more “disciplined” growth strategy (i.e. less

aggressive fleet expansion) to ensure that its gearing level is in check; and
(3) To gradually take back the financial and non-financial support lent to
associates Thai AirAsia, Indonesia AirAsia and AirAsia X (via debt raising in
their own capacity or IPO). Indicative fair value is RM1.88 based on 11x
Joshua CY Ng
FY12/11 EPS (in line with Ryanair), adjusted for RM733.4m owed to AirAsia
(603) 92802151
by Thai AirAsia and Indonesia AirAsia that translates to 28sen/AirAsia share. joshuang@rhb.com.my

Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 1 of 2
available for download from www.rhbinvest.com
 5 August 2010

Table 2: Earnings Forecasts Table 3: Forecast Assumptions

FYE Dec (RMm) FY09a FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 3,178.9 3,399.5 3,735.3 4,067.9 Load factor (%) 72 75 75

Turnover growth (%) 20.4 6.9 9.9 8.9 Jet fuel cost (US$/barrel) 85 85 85

EBITDA 1239.0 1222.4 1472.3 1693.3

EBITDA margin (%) 39.0 36.0 39.4 41.6

Depreciation -424.6 -369.3 -416.4 -469.4

Net Interest -366.9 -421.1 -508.2 -591.7
Associates 0.0 0.0 0.0 0.0
EI 191.9 0.0 0.0 0.0

Pretax Profit 639.3 432.1 547.8 632.2

Tax -90.3 -1.5 -1.5 -1.5
PAT 549.1 430.6 546.3 630.7
Minorities 0.0 0.0 0.0 0.0
Net Profit 549.1 430.6 546.3 630.7
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be contrary
to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as an
offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever
and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time
have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of
persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy
will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group
may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity securities or loans
of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other services
from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon
various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over
a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities,
subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

A comprehensive range of market research reports by award-winning economists and analysts are exclusively Page 2 of 2
available for download from www.rhbinvest.com