AAX flying out of the turbulence. Can it expect a smooth landing?

AirAsia X Bhd (AAX) could see a rebound after its recent pullback from the recent high of RM1.62 on July 29 to close at RM1.34 on Aug 27.

What’s exciting for the budget carrier is that the stronger ringgit will have a positive impact on its bottomline. AAX stands to benefit from a stronger Ringgit, which has gained 7.7% since the beginning of July to RM4.35 per USD currently. Ultimately, the airlines wil incur lower aircraft fuel expenses, which is quoted in USD.

However, it reported net earnings (which included lumpy accounting items) of RM331.5 millon in FYDec 2023 versus FY22’s bottomline of RM33.3 billion. AAX saw quarterly net profit of RM80.1 million in 1QFY24 versus RM328 million in 1QFY23 and RM27.4 million in 4QFY23.

Based on consensus estimates, AAX is projected to make core net profit of RM84.9 million in FY24 and RM120 million in FY25, implying price earnings multiples of 7.1x and 5.0x, respectively. In its latest released quarter, AAX recorded a 30% year-on-year increase in revenue to RM669.1 million in 2Q24. This reflected the sustained demand in core markets as the airlines ramped up its capacity to 16 aircraft operational.

In 2Q24, it posted a net profit of RM4.8 million, even with second quarters traditionally being the weakest and before full activation of its 18-aircraft fleet.

This quarter, the number of passengers carried rose by 42% YoY to over 880,000 passengers, surpassing the 30% YoY growth in seat capacity. It was also bolstered by the spring travel seasons in key markets and the Eid holiday period in 2Q. Meanwhile, passenger load factor was healthy at 83%, increasing seven percentage points YoY, as load factors on high-demand routes in China, India and Japan trended close to 90%.

AAX’s average base fare was RM458 in 2Q24 against RM650 last quarter, in line softer travel season during the traditionally weakest quarter in the year.
Ancillary revenue increased over 48% YoY to RM218.2 million, in line with the increase in the number of passengers carried and buoyed by ancillary revenue per passenger increasing by 5% YoY to RM248 per passenger.

On network, the airlines reinforced its commitment to regain market leadership in core markets and resumed operations to Xi’an in April.
This brings its presence in this core market to five destinations in China including Beijing, Chengdu, Hangzhou and Shanghai in 2Q24.

The counter is back on investors’ radar as they can expect AAX to grow in line with demand and market conditions as well as fleet developments. Plus, AAX expects its two remaining aircraft to rejoin operations by the second half of the year and this is estimated to deliver further upside to our bottom line.