AirAsia seen to grow 80% a year
BY C.S. TAN
BUDGET airline AirAsia will be able to grow its passenger numbers, fleet size and net earnings by about 80% a year over the next three years, an analyst says.
The airline, including 49%-owned Thai AirAsia, carried 2.8 million passengers in its financial year ended June 30 (FY04). Its passenger volume is expected to triple to 8.5 million in FY05 and to rise further to 13.5 million in FY06.
This extraordinary rate of growth is attributed to a boom in low-cost regional air travel. The buoyant business condition arises from rising incomes and affordable air travel in the region.
A high growth rate will lift valuations for AirAsia's initial public offering (IPO) exercise and, later, its share price. The company announced last week it received approval from the authorities for a listing on Bursa Malaysia. The airline will make a public issue of 700 million shares of 10 sen each. It is expected to disclose the offer price at an underwriting ceremony today.
In the past, the demand for air travel was largely determined by economic growth and income levels. This has changed in recent years, as global demand is now also being driven by budget prices. Low-cost carriers (LCCs) like AirAsia have provided this impetus for demand.
To cater for the increasing passenger traffic, AirAsia, together with ThaiAsia, is expected to expand its fleet from 18 aircraft presently to 54 by FY07.
The group's net profit is estimated at RM50mil in the current FY05. This is believed to be quite a close estimate as the group has hedged the bulk of its fuel requirements until the end of this financial year.
Going forward, the analyst forecasts AirAsia to be able to raise its earnings to RM300mil by FY07 if jet fuel prices drop from the current US$55 a barrel to around US$38, which he believes is a more sustainable price.
On the basis of a forecast of AirAsia's earnings for the 2005 calendar year and a price earnings multiple (PE) of 22 times, the airline would be worth RM4bil, he says. He used this rich PE to reflect the growth stage the company is in. The airline is expected to price its IPO to value the company at RM3bil, he adds.
It is a particular concern to some observers that a number of other budget airlines have emerged in the region. AirAsia will be able to hold its own, the analyst says, as it is believed to have the lowest cost structure among these LCCs. Hence, AirAsia is able to price its seats lower than those of these competitors.
BY C.S. TAN
BUDGET airline AirAsia will be able to grow its passenger numbers, fleet size and net earnings by about 80% a year over the next three years, an analyst says.
The airline, including 49%-owned Thai AirAsia, carried 2.8 million passengers in its financial year ended June 30 (FY04). Its passenger volume is expected to triple to 8.5 million in FY05 and to rise further to 13.5 million in FY06.
This extraordinary rate of growth is attributed to a boom in low-cost regional air travel. The buoyant business condition arises from rising incomes and affordable air travel in the region.
A high growth rate will lift valuations for AirAsia's initial public offering (IPO) exercise and, later, its share price. The company announced last week it received approval from the authorities for a listing on Bursa Malaysia. The airline will make a public issue of 700 million shares of 10 sen each. It is expected to disclose the offer price at an underwriting ceremony today.
In the past, the demand for air travel was largely determined by economic growth and income levels. This has changed in recent years, as global demand is now also being driven by budget prices. Low-cost carriers (LCCs) like AirAsia have provided this impetus for demand.
To cater for the increasing passenger traffic, AirAsia, together with ThaiAsia, is expected to expand its fleet from 18 aircraft presently to 54 by FY07.
The group's net profit is estimated at RM50mil in the current FY05. This is believed to be quite a close estimate as the group has hedged the bulk of its fuel requirements until the end of this financial year.
Going forward, the analyst forecasts AirAsia to be able to raise its earnings to RM300mil by FY07 if jet fuel prices drop from the current US$55 a barrel to around US$38, which he believes is a more sustainable price.
On the basis of a forecast of AirAsia's earnings for the 2005 calendar year and a price earnings multiple (PE) of 22 times, the airline would be worth RM4bil, he says. He used this rich PE to reflect the growth stage the company is in. The airline is expected to price its IPO to value the company at RM3bil, he adds.
It is a particular concern to some observers that a number of other budget airlines have emerged in the region. AirAsia will be able to hold its own, the analyst says, as it is believed to have the lowest cost structure among these LCCs. Hence, AirAsia is able to price its seats lower than those of these competitors.