Maybank IB has maintained a buy call on AirAsia X Thailand with a higher TP of MYR3.56 as the investment house expects the 49%-owned AAX to contribute sizeable earnings going forward thanks to its recently concluded debt rehabilitation.
The fare environment in Thailand is more favourable than in Malaysia and Maybank IB expects it to remain as such in the near term. It has also raised the 2023, 2024, and 2045 core net profit forecast by 7%/47%/41% and migrated its valuation basis to 6x CY24E PER from 10x CY23E PER while the next catalyst will be the upliftment of PN17 status.
On 31 August, the airline announced that the Central Bankruptcy Court of Thailand had approved its business rehabilitation plan. This means that creditors will take a haircut on the amount owed to them by TAAX. Unlike MAAX, TAAX will not have to share profits with creditors going forward. Recall that AAX stated that it expects to recognise its share of the debt settlement and waiver of debts pursuant to the debt rehabilitation amounting to c.MYR300m.
More importantly, the debt rehabilitation means that AAX will equity account for its share of TAAX net profits going forward. This is significant because TAAX has never contributed profits to AAX since commencing operations in 2013. Note that for 6M23, TAAX generated a core net profit of MYR98.8m which was much higher than AAX 6M23 core net profit of MYR8.7m (which was, in turn, entirely derived from MAAX) due to high unit passenger revenue of MYR1,110, which was 25% higher than MAAX’s.
To account for its share of TAAX net profits from Sep 2023 onwards, Maybank IB said it tweaked FY23E core net profit upwards for AAX by 7% and lift FY24E and FY25E core net profit by 47% and 41% respectively. Note that they are premised on the 8 Airbus A330s that TAAX currently has in its fleet. TAAX stated that it plans to grow its fleet count to 17 Airbus A330s over the next 5 years.
Thus, the house believes it is being conservative in its TAAX estimates.
