malaysian aviation neutral -...

May 09, 2014

Mala

ysi

a

SEC

TO

R R

ESEA

RC

H |

SEE PAGE 15 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS PP16832/01/2013 (031128)

Malaysian Aviation NEUTRAL (unchanged)

1Q14 results preview 1Q14 results season underway: MAHB already posted on 25

Apr, MAS to release on 15 May, AirAsia X on 19 May, and

AirAsia on 20 May.

Strong passenger traffic growth of 18.4% YoY for the airlines;

industry load factor was up 1.3ppt to 79.5%.

Maintain NEUTRAL, AirAsia (top BUY), AirAsia X (BUY), MAS

(HOLD) and MAHB (SELL).

What’s New

All airlines have posted their 1Q14 traffic statistics ahead of their

results. The headline numbers are impressive; total passenger

traffic grew by 18.4% YoY with a load factor of 79.5% (vs. 78.2% in

1Q13).

What’s Our View

We don’t expect head-turning financial numbers for 1Q14, only

AirAsia will be profitable whereas MAS and AirAsia X will still be

firmly in loss-making territory. The culprit remains low yields.

We are optimistic that this is the bottom of the cycle. We notice

that published ticket prices are on the uptick since Feb/Mar

especially for domestic Malaysia and international routes. There

are some weak segments (China, Australia, Thailand) but the

overall impact is limited. Furthermore, the industry is deploying

modest capacity growth in 2014 and this will ensure the supply-

demand relationship is in balance and will support yield growth.

All the airline stocks are trading at their lowest levels in the past

year and we think it is a good time to accumulate on cheap

valuations. AirAsia is our top BUY pick, followed by AirAsia X. MAS

is on fair value territory and we advocate HOLD. MAHB is our sole

SELL for the sector as the stock is expensive and has a high debt

burden relative to its peer group.

Analysts

Mohshin Aziz

(603) 2297 8692

[email protected]

Malaysian aviation sector – Peer valuation summary

Stock Rec Shr

px

Mkt cap TP PER (x) PER (x) PER (x) P/BV

(x)

P/BV

(x)

ROE

(%)

ROE

(%)

Net yield

(%) MYR MYR m MYR CY14F CY15F CY16F CY14F CY15F CY14F CY15F CY14F

Airlines:

AirAsia BUY 2.20 6,122 2.65 10.5 10.4 9.9 1.32 1.19 13.3 12.1 2.3

AirAsia X BUY 0.75 1,778 0.86 38.6 8.5 5.4 1.15 0.86 3.3 11.6 -

MAS HOLD 0.22 5,097 0.22 - 15.3 7.6 0.96 0.90 - 6.1 -

Simple avg 24.6 11.4 7.6 1.14 0.98 8.3 9.9 2.3

MAHB SELL 8.03 11,161 7.03 24.6 26.1 20.1 1.88 1.81 7.8 7.1 1.8

Source: Maybank KE

May 09, 2014 2

Aviation Sector – 1Q14 Results Preview

Impressive 1Q14 operating statistics

Traffic growth remains robust

Passenger traffic grew by 18.4% YoY in 1Q14, which makes Malaysia the

fastest growing country in Asia Pacific. As shown in the table below, MAS

carried 20.7% more passengers YoY in 1Q14, which constituted 31.6% of the

total industry growth. AirAsia X’s growth of 66.9% YoY constituted 13.5% of

the total industry growth. Traffic of the other airlines, not including

AirAsia, grew 23.1% YoY, constituting 48.5% of the total industry growth.

Malindo Air does not divulge its operating statistics, but we believe it

formed the biggest chunk of the growth in the “other airlines” category. It

can be surmised that both MAS and Malindo are the biggest growth

provider for the Malaysian airline industry in 1Q14, as the case has been

for the past four quarters.

Malaysia traffic growth by airlines and attribution analysis

Passenger carried 1Q14 1Q13 % YoY change % attribution

AirAsia 5,373,202 5,168,167 4.0% 6.4%

AirAsia X 1,080,763 647,366 66.9% 13.5%

Malaysian Airlines 5,895,000 4,883,000 20.7% 31.6%

Other airlines 8,276,558 6,722,982 23.1% 48.5%

Total 20,625,523 17,421,515 18.4% 100.0%

Sources: Respective companies’ data

Load factor holding strong

The industry load factor was 79.5% in 1Q14, a growth of 1.3ppt from a year

ago. As for individual airlines, AirAsia and AirAsia X both have seen

respectable YoY load factor growth from an already high level achieved

back in 1Q13. MAS saw a slight dip of 0.2ppt YoY to 76.4%, but this is

respectable given that the airline had to grapple with the MH370 incident

during the period.

Malaysia-based airlines’ average load factor Malaysia-based airlines’ load factor

Sources: Respective companies’ data, Maybank KE Sources: Respective companies’ data, Maybank KE

71.7%

76.2%

77.5%77.9%

81.0%

79.5%

66%

68%

70%

72%

74%

76%

78%

80%

82%

2009 2010 2011 2012 2013 1Q14

77.9%

80.0%

78.2%

84.6%

80.7%

84.2%

81.8% 82.3%

80.9%

85.8%

76.6%

80.4%

84.8%

81.6%

76.4%

70%

75%

80%

85%

90%

1Q13 2Q13 3Q13 4Q13 1Q14

AirAsia AirAsia X MAS

May 09, 2014 3


Yields expected to stabilise

We believe that the fare war of 2013 had reached its tail end back in 4Q13

and will show some credible signs of stabilisation in 1Q14 with a lower

yield drop. The yields should be higher YoY from 2Q14 onwards. This is

based from our observation that published ticket prices are higher YoY for

all domestic sectors, European and some regional sectors. However, we

note that published fares to Australia, Thailand and selected Chinese

destinations (Beijing, Xian, and Shanghai) remain very cheap.

Malaysia-based airlines’ yield trend in 2013

Sources: Respective companies’ data, Maybank KE

Unit cost expected to be marginally lower

The average jet fuel price for 1Q14 was USD130.8/bbl, which was 2.5%

lower than in 1Q13. However, cost savings from the lower fuel price is

partially negated by the MYR:USD depreciating by 6.8% YoY to 3.2883 in

1Q14. In addition, MAHB has imposed a 9% and 18% increase in landing and

parking charges respectively starting 1st Jan 2014. Taking into account all

these factors, we expect the airlines to show a modest unit cost reduction

of ≤1% YoY in 1Q14.

No change in passenger service charges (PSC). The PSC at the airports

was supposed to have increased by 10% on 12 Feb 2014 as part of the

operating agreement between MAHB and the government. However, the

government remained silent on this matter and therefore the old tariff

remains. This is positive for the airlines as a PSC increase would

negatively impact yields.

-20%

-10%

0%

10%

20%

30%

1Q13 2Q13 3Q13 4Q13 1Q14F

MAS AirAsia AirAsia X Industry Average

The cycle has

bottomed in 4Q13

May 09, 2014 4


Other developments

We believe for the remainder of 2014, passenger traffic growth will

moderate to ≤10% YoY. This is due to the following factors: 1) higher base

effect as Malindo launched its services back in 2Q13; 2) MAS is

progressively reducing its fleet size from Apr 2014 onwards; and 3) AirAsia

will grow its fleet on the backend of 2014.

MH370 will impact on short term demand

The unfortunate MH370 incident on 8th March will negatively impact

demand for air travel in the short term. Other similar historical incidents

saw two to three months of weakness in air travel demand before a full

recovery. We don’t think this incident will pose a long term structural

impact on the Malaysian aviation industry. We keep our full year 2014

passenger traffic growth target of 9%-10% unchanged.

klia2 opened on 2 May

klia2 officially launched its services on 2 May. This is a positive

development as we initially forecast 1 Sep as our base case opening date.

The initial reception was very good and so far, the terminal has been

operating seamlessly. We expect klia2 operations will take two to three

months to stabilise before all the airlines operating from the terminal to

re-commence their growth plans.

Good for AirAsia X and Malindo. klia2 will bring instant benefits to airlines

such as AirAsia X and Malindo. The airport has an international concourse

and this will enable passengers to make seamless transits within the

enclave of the terminal. This benefits AirAsia X and Malindo tremendously

as their business models are highly reliant on transiting passengers.

Malindo will also benefit from the lower PSC at klia2 compared to the main

terminal (~50% cheaper), and this will boost its competitiveness against

the AirAsia Group.

Mixed for AirAsia. klia2 is a mixed blessing for AirAsia in our view. The

bigger and better terminal will provide the platform for long term growth

and enhance its customer experience. But it has to abandon many of its

LCC practices such as not using aerobridges and a swift 25 minute aircraft

turnaround is not possible with this terminal layout. In many ways, we

think AirAsia has to tweak its operations and become a network carrier in

order to fully take advantage of its home base at klia2.

Bad for MAS. Currently, the PSC at klia2 is half of that for the KLIA main

terminal. This is despite klia2 is equal in terms of amenities and passenger

comfort. This may result in some of MAS’ core passengers switching to

other airlines based at klia2 due to the cheaper all-in cost (ticket fare +

PSC) and the fact that the comfort margin has narrowed.

May 09, 2014 5


Stock Recommendation

AirAsia (BUY, TP: MYR2.65)

AirAsia has taken an evasive strategy to halt capacity growth in order to

retain its high load factor and reduce unit cost. We estimate a 1Q14 core

net profit of MYR135.6m (-8.4% YoY) due to the impact of lower yields.

This would be within our expectation for the full-year. Now that the

market supply-demand is in balance, AirAsia can push for higher yields. We

already see this happening, as its published fares today are higher than a

year ago. Maintain BUY, with a target price of MYR2.65, based on FY14 PER

of 10.5x, which is on par with the global LCC average.

AirAsia X (BUY, TP: MYR0.86)

AirAsia X continues to enjoy strong support for its services, as evident from

its record load factor of 85.8% in 1Q14 despite adding a whopping capacity

growth of 60% YoY. We estimate a 1Q14 core net loss of MYR50.1m (vs a

profit of MYR44.0m in 1Q13) due to the impact of lower yields. This would

be below ours and consensus expectation for FY14. The situation should

improve significantly from 3Q14 onwards as MAS has effectively reduced

capacity on selected international routes ─ due to aircraft redelivery

plans, this will enable AirAsia X to push for higher yields. Furthermore,

many of its routes have become mature and contribute positively to the

group. We maintain our BUY call, with a revised target price of MYR0.86,

based on FY15 P/BV of 1.0x.

MAS (HOLD, TP: MYR0.22)

This is an exceptionally difficult period for MAS. The MH370 incident has

negatively impacted the airline’s reputation and this greatly inhibits its

effort to push for higher yields. Furthermore, there has not been much

clarity over the on-going costs relating to the MH370 incident. We estimate

an out of pocket expense of MYR60-100k per day for the accommodation

and other expenses for the next of kin of MH370 passengers. It is difficult

to make earnings forecast for 1Q14 under the circumstances, we estimate

MAS to make a core net loss of MYR250-300m, down from a loss of

MYR340m in 1Q13. We rate MAS a HOLD based on 0.9x 2014 P/BV ─ its

trough valuation for the past decade.

MAHB (SELL, TP: MYR7.03)

MAHB had a clean 1Q14, with a core net profit of MYR123.5m (+15.6% YoY,

+61.4% QoQ) on the back of an 18.4% YoY passenger growth. The upcoming

quarters will be weaker due to lower passenger traffic growth expectation

and the start-up costs associated with klia2. MAHB is a SELL with a target

price of MYR7.03 based on 2015 EV/EBITDA of 10.3x ─ which is a 10%

premium to global peers after considering MAHB’s strong growth potential.

The stock is expensive with a high debt burden relative to its peer group.

May 09, 2014

C

OM

PA

NY

RESEA

RC

H |


AirAsia (AIRA MK)

Share Price: MYR2.20 MCap (USD): 1.9B Malaysia BUY Target Price: MYR2.65 (+20%) ADTV (USD): 5.2M Aviation (unchanged)

1Q14F: First sign of recovery 1Q14 results will be released on 20th May. Expect core net

profit of MYR136m, a decline of 8.4% YoY.

Weak yields have more than offset the positive impact of

higher load factor and lower unit cost.

Maintain BUY, with an unchanged target price of MYR2.65

pending an analyst briefing post the results announcement.

What’s New

AirAsia’s 1Q14 operating statistics was positive, traffic grew by

4.0% YoY with a load factor of 80.6% (vs. 78.5% in 1Q13). However,

we expect the financial results to be weak due to the weak yield

environment and the depreciated ASEAN currencies against the

USD.

What’s Our View

AirAsia has taken an evasive strategy to halt capacity growth in

order to retain its high load factor and reduce unit cost. This is a

wise decision to ensure it remains profitable, and also to position

its resources on standby mode and ready to react when the market

demands for it. We estimate a 1Q14 core net profit of MYR135.6m

(-8.4% YoY) due to the impact of lower yields. This would be within

our expectations for the year and within consensus as well.

Now that the market supply-demand is in balance, AirAsia can push

for higher yields. We already see this happening, as its published

fares today are higher than a year ago. Maintain BUY, with a target

price of MYR2.65, based on FY14 PER of 10.5x, which is on par with

the global LCC average. We await the post results analyst briefing

before making any adjustments to our financial forecasts and fair

value estimate, if any.

Key Data

Shariah status NO

52w high/low (MYR) 3.54/2.18

Free float (%) 68.4

Issued shares (m) 2,781

Market capitalization MYR6.1B

Major shareholders:

TUNE AIR SDN BHD 23.0% WELLINGTON

MANAGEMEN 8.1%

EMPLOYEES

PROVIDENT 8.0%

Share Price Performance

1 Mth 3 Mth 12 Mth

Absolute (%) (7.2) (1.3) (27.2)

Relative to country (%) (7.7) (5.7) (32.2)

Maybank vs Market

Positive Neutral Negative

Market Recs 16 9 3

Maybank Consensus % +/-

Target Price (MYR) 2.65 2.80 (5.4)

2014 Net Profit

(MYR m) 705 708 (0.4)

2015 Net Profit

(MYR m) 710 828 (14.4)

Source: Bloomberg; Maybank

FYE <<FYEMonthAbbr>>

(MYR m)

2012A 2013 2014F 2015F 2016F Revenue 4,946.1 5,189.2 5,709.5 6,149.0 6,523.5 EBITDAR 1,765.9 1,845.1 2,152.9 2,326.4 2,492.2

Core net profit 706.9 417.6 705.1 709.5 741.6

Core EPS (sen) 25.4 15.0 25.3 25.5 26.7

Core EPS growth (%) -14.5 -41.0 68.8 0.6 4.5 Net DPS (sen) 24.0 4.0 5.0 5.0 5.0

BVPS (MYR) 192.6 180.0 200.7 222.1 244.2

Core P/E (x) 8.6 14.7 8.7 8.6 8.3 EV/EBITDAR (x) 7.7 9.0 7.8 7.8 7.4

Net dividend yield (%) 10.5 1.8 2.3 2.3 2.3

P/BV (x) 1.14 1.22 1.10 0.99 0.90 Net debt/equity (%) 116.2 175.5 166.2 176.1 166.5

ROAE (%) 13.2 8.1 13.3 12.1 11.4

ROAA (%) 4.2 2.5 4.0 3.7 3.5

Chg in net profit (%) - - n/a n/a n/a

Mohshin Aziz

(603) 2297 8692

[email protected]

1,500

1,575

1,650

1,725

1,800

1,875

1,950

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

May-12 Nov-12 May-13 Nov-13

AIRA MK EquityFBMKLCI Index

Resu

lts

Pre

vie

w

May 09, 2014 7


1Q14 results expectations

The table below shows that almost all of AirAsia’s operations are expected

to see YoY profit declines, led by Thailand due to the challenging domestic

political situation that has dented demand for air travel. Indonesia is

suffering from weak IDR against the USD. The airlines in Philippines and

India are still in the early stages of business development and therefore

incurring operational losses.

Summary of results (projected)

FY 31 Dec (MYR '000) 1Q14F 1Q13A % YoY 4Q13A % QoQ

PROFITS FROM INDIVIDUAL BUSINESS SEGMENT:

Malaysia operations (100%) 131,825 157,148 (16.1) 154,919 (14.9)

Thailand operations (45%) 12,912 34,775 (62.9) 19,228 (32.8)

Indonesia operations (49%) (9,051) 212 n/a (57,320) (84.2)

Sub-total for airline business 135,686 192,135 (29.4) 116,827 16.1

Other new business start-ups

Asian Aviation CAE (50%) 2,375 1,900 25.0 (1,700) (239.7)

Expedia AAE Travel (50%) 9,400 (4,250) n/a 9,400 0.0

BIG (50%) (750) (950) (21.1) (750) 0.0

AirAsia Philippines (40%) (8,000) (8,000) 0.0 (9,920) (19.4)

AirAsia India (49%) (3,136) 0 n/a (3,136) 0.0

AirAsia Japan (49%) 0 (32,830) n/a 0 n/a

Sub-total for new businesses (111) (44,130) (99.7) (6,106) n/a

Total Core Net Profit 135,575 148,005 (8.4) 110,721 22.4

Group Core EPS 4.9 5.3 (8.4) 4.0 22.6

Source: Company, Maybank KE (1Q14F)

Things will get better from 2Q14 onwards

The positive key take away from this anticipated result is that this will be

the last quarter of YoY profit decline, and we expect profit growth from

2Q14 onwards. This is because the Malaysian fare war started back in

2Q13, and it has peaked in 4Q13. The situation has since improved and we

notice that AirAsia’s published fares are much higher than they were a

year ago.

May 09, 2014 8


INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)

FY Dec 2013 2014F 2015F 2016F FY Dec 2013 2014F 2015F 2016F

Revenue 5,189.2 5,709.5 6,149.0 6,523.5 Fixed Assets 11,246.2 12,361.0 14,591.7 15,665.9

EBITDAR 1,845.1 2,152.9 2,326.4 2,492.2 Other LT Assets 2,633.7 2,633.7 2,633.7 2,633.7

Depreciation & Amortisation 634.5 715.2 818.6 925.3 Cash/ST Investments 1,385.4 1,363.8 977.7 1,153.2

Operating Profit 1,021.3 1,189.9 1,259.9 1,319.0 Other Current Assets 1,916.1 2,043.4 2,150.9 2,242.5

Interest (Exp)/Inc (368.2) (459.4) (512.6) (555.7) Total Assets 17,181.

3

18,401.

9

20,353.

9

21,695.

3 Forex and exceptionals (289.9) 0.0 0.0 0.0

Pre-Tax Profit 363.2 730.5 747.3 763.3 ST Debt 1,081.5 1,081.5 1,081.5 1,081.5

Tax 0.9 (12.9) (12.7) (9.1) Other Current Liabilities 1,723.4 1,890.8 2,032.3 2,151.8

Minority Interest 0.0 0.0 0.0 0.0 LT Debt 9,089.4 9,563.1 10,778.2 11,384.1

Reported Net Profit 364.1 717.6 734.6 754.2 Other LT Liabilities 281.1 281.1 281.1 281.1

Non-cash items 53.6 (12.5) (25.1) (12.5) Minority Interest 0.0 0.0 0.0 1.0

Core Net Profit 417.6 705.1 709.5 741.6 Shareholders' Equity 5,006.0 5,585.3 6,180.8 6,795.9

Total Liabilities-Capital 17,181.

3

18,401.

9

20,353.

9

21,695.

3 Revenue Growth % 4.9 10.0 7.7 6.1

EBITDAR Growth (%) 4.5 16.7 8.1 7.1 Share Capital (m) 2,782.6 2,782.6 2,782.6 2,782.6

EBIT Growth (%) (0.7) 16.5 5.9 4.7 Net Debt 8,785.5 9,280.8 10,882.0 11,312.3

Reported Net Profit Grth (%) (48.6) 97.1 2.4 2.7 Capitalised leases 1,639.0 1,391.1 1,143.3 895.4

Core Net Profit Growth (%) (40.9) 68.8 0.6 4.5 Working Capital 496.6 434.8 14.8 162.4

Tax Rate % (0.2) 1.8 1.7 1.2 Adjusted Net Gearing % 208.2 191.1 194.6 179.6

CASH FLOW (MYR m) RATES & RATIOS

FY Dec 2013A 2014F 2015F 2016F

FY Dec 2013A 2014F 2015F 2016F

Profit before taxation 363.2 730.5 747.3 763.3

Dep. & Amort. 634.5 715.2 818.6 925.3 EBITDAR Margin (%) 35.6 37.7 37.8 38.2

Cash tax paid (368.2) (459.4) (512.6) (555.7) EBIT Margin (%) 19.7 20.8 20.5 20.2

FRS and derivatives (271.7) 40.2 34.0 28.9 Reported Net Prf Margin (%) 7.0 12.6 11.9 11.6

Chg in Wkg.Cap. (11.1) (12.9) (12.7) (9.1) Core Net Profit Margin (%) 8.0 12.3 11.5 11.4

Other Operating CF 486.2 459.4 512.6 555.7 ROAE (%) 8.1 13.3 12.1 11.4

Net Operating CF 833.0 1,473.0 1,587.2 1,708.4 ROA (%) 2.5 4.0 3.7 3.5

Capital Exp.(net) (2,095.8) (2,122.5) (3,049.2) (2,287.6) ROCE (%) 8.0 12.3 11.5 11.4

Other Invts.(net) 4.2 292.5 0.0 288.0 Div Cover (x) 3.8 5.1 5.1 5.3

Invts in Assoc. & JV Interest Cover (x) 2.8 2.6 2.5 2.4

Div from Assoc & JV Current Ratio (x) 1.2 1.1 1.0 1.1

Other Investing CF (123.0) 0.0 0.0 0.0 Adj. Net Debt/Equity (%) 208.2 191.1 194.6 179.6

Net Investing CF (2,214.6) (1,830.0) (3,049.2) (1,999.6) Capex to Debt (%) (20.1) (19.9) (25.4) (18.7)

Div Paid (667.2) (139.1) (139.1) (139.1) N.Cash/(Debt)PS (sen) 374.6 383.5 432.2 438.7

Chg in Gross Debt 1,200.2 473.7 1,215.1 605.8 Opg CFPS (sen) 29.9 52.9 57.0 61.4

Capital Issues 1.2 0.0 0.0 0.0 Free CFPS (sen) (45.4) (23.3) (52.5) (20.8)

Other Financing CF 6.0 (0.1) (0.9) (0.9)

Net Financing CF 541.2 335.4 1,076.0 466.7 Asset Turnover (x) 0.3 0.3 0.3 0.3

Net Cashflow (840.4) (21.6) (386.1) 175.5 Asset/Debt (x) 1.7 1.7 1.7 1.7

Debt / EBITDAR (x) 5.6 5.0 5.2 4.9

Free cash flow (1,262.8) (649.5) (1,462.0) (579.1) Debt / Mkt cap (x) 1.6 1.6 1.8 1.8

May 09, 2014

C

OM

PA

NY

RESEA

RC

H |


AirAsia X (AAX MK)

Share Price: MYR0.75 MCap (USD): 0.5B Malaysia BUY Target Price: MYR0.86 (+15%) ADTV (USD): 1.1M Aviation (unchanged)

1Q14F: Still got the Aussie flu 1Q14 results will be released on 19th May. Expect core net

loss of MYR50m, a reversal from a profit of MYR44m in 1Q13.

Weak yields and higher unit cost would have more than

offset the positive impact of higher load factor.

Maintain BUY, but with a lower target price of MYR0.86.

What’s New

AirAsia X’s 1Q14 operating statistics was terrific; traffic grew by

60% YoY with a record load factor of 85.8% (vs. 84.2% in 1Q13).

However, we expect AirAsia X to be loss making in the period due

to the persistent weak Australian market.

What’s Our View

AirAsia X’s strategy of aggressive growth coincides at a time when

the market is soft and overcapacity is at its peak. This has caused

severe yield deterioration. We expect 1Q14 core net loss of

MYR50.1m (vs profit of MYR44.0m in 1Q13; loss of MYR57.6m in

4Q13). This would be below ours and consensus expectations.

AirAsia X will be loss making in 2Q14 as well, we estimate, as it is a

seasonally weak quarter. We believe it will only start being

profitable from 3Q14. The market supply-demand has improved

and industry yields are recovering. Also, many of AirAsia X’s new

routes will become mature and start to contribute positively.

We cut our FY14-16 earnings forecasts by -72.5%/-28.4%/-10.0%

after taking into account the current yield environment and the

latest fleet deployment plan. We maintain our BUY call, with a

revised target price of MYR0.86 (previously MYR1.06), based on

FY15 P/BV of 1.0x. The share price has fallen by 40% since its IPO

and the market is overly bearish in our view, the Company is in the

cusp of a turnaround and is bound to deliver strong profits.

Key Data

Shariah status NO

52w high/low (MYR) 1.28/0.74

Free float (%) 35.9



Major shareholders:

TUNE AIR SDN BHD 17.8% EPF 13.8%

WELLINGTON

MANAGEMEN

7.1%


1 Mth 3 Mth 12 Mth

Absolute (%) (1.3) (23) na

Relative to country (%) (1.9) (27) na

Maybank vs Market


Market Recs 1 8 6


Target Price (MYR) 0.86 0.84 2.1

2014 Net Profit

(MYR m)

46 44 5.7

2015 Net Profit

(MYR m)

210 120 75.6


FYE <<FYEMonthAbbr>>

(MYR m)

2012A 2013A 2014F 2015F 2016F Revenue 1,967.4 2,307.5 3,437.6 4,294.7 4,992.6 EBITDAR 308.5 361.3 591.7 826.7 1,032.5

Core net profit (5.8) (22.2) 46.1 209.9 329.4

Core EPS (sen) (0.2) (0.9) 1.9 8.9 13.9

Core EPS growth (%) n/a 279.7 -307.8 355.4 56.9 Net DPS (sen) - - - - -

BVPS (MYR) 24.5 52.2 65.0 87.3 115.9

Core P/E (x) n/a na 38.6 8.5 5.4 EV/EBITDAR (x) 17.7 16.0 11.7 9.3 7.5

Net dividend yield (%) - - - - -

P/BV (x) 3.06 1.44 1.15 0.86 0.65 Net debt/equity (%) 6.3 3.2 3.3 2.8 2.2

ROAE (%) n/a (2.4) 3.3 11.6 13.7

ROAA (%) n/a (0.7) 1.0 3.2 3.9

Chg in net profit (%) - - (72.5) (28.4) (10.0)

Mohshin Aziz

(603) 2297 8692

[email protected]

1,500

1,575

1,650

1,725

1,800

1,875

1,950

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Jul-13 Sep-13 Nov-13 Jan-14 Mar-14

AAX MK EquityFBMKLCI Index

Resu

lts

Pre

vie

w

May 09, 2014 10


1Q14 results expectations

We estimate AirAsia X will be loss making in 1Q14, due to the impact of

weak yields. We forecast yield decline of 12.2% YoY, due to the weak

markets and also the impact of new route launches. The Australian routes

in particular, are extremely weak and this is a common complaint by MAS

management. Unit cost has also increased by 4.6% YoY, we estimate, due

to the 6.8% YoY weakening of the MYR against the USD. Approximately 70%

of AirAsia X’s operating costs are USD denominated, and this had a

profound impact on AirAsia X’s unit cost.

Summary of results (projected)

FY 31 Dec (MYR '000) 1Q14F 1Q13A % YoY 4Q13A % QoQ

Passenger revenue 569.6 419.0 35.9 516.5 10.3

Ancillary income & others 182.7 116.3 57.1 163.1 12.0

Total Revenue 752.2 535.3 40.5 679.6 10.7

EBITDAR 90.5 122.1 (25.9) 72.8 24.3

EBIT (27.4) 57.6 n/a (35.3) (22.3)

Pre-tax profit (50.1) 34.8 n/a (170.4) (70.6)

Tax 0.0 15.1 n/a 39.3 n/a

Reported net profit (50.1) 49.9 n/a (131.0) (61.7)

add back

Non-cash items (gain) / loss 0.0 (5.9) n/a 73.5 n/a

Core Net Income (50.1) 44.0 n/a (57.6) (12.9)

EBITDAR margin (%) 12.0 22.8 -10.8 ppt 10.7 1.3 ppt

Core Net income margin (%) (6.7) 8.2 -14.9 ppt (8.5) 1.8 ppt

Tax rate (%) 0.0 -43.5 43.5 ppt 23.1 n/a

Operating Statistics:

Capacity (ASK million) 6,220 3,885 60.1 6,012 3.5

Passengers carried 1,080,763 647,366 66.9 973,285 11.0

Load factor (%) 85.8 84.2 1.6 ppt 80.5 5.4 ppt

Unit Revenue (MYR / pax) 696.0 826.9 (15.8) 698.2 (0.3)

RASK (sen) 12.1 13.8 (12.2) 11.3 7.0

CASK (sen) 12.9 12.4 4.6 12.1 11.3

CASK - ex fuel (sen) 7.0 6.5 6.6 6.3 11.3

Source: Company, Maybank KE

Things will get better from 3Q14 onwards

2Q14 will also be another loss making quarter, we estimate, as this is

AirAsia X’s seasonally weakest quarter. We are optimistic that the Group

will be profitable from 3Q14 onwards as the market supply-demand has

improved and we have noticed that published fares are much higher than

the same period last year. Furthermore, many of the new route launches

will become mature and start contributing positively to the Group.

May 09, 2014 11


INCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)

FY Dec 2013A 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F

Revenue 2,307.5 3,437.6 4,294.7 4,992.6 Fixed Assets 2,257 3,825 5,297 6,355

EBITDAR 361.3 591.7 826.7 1,032.5 Other LT Assets 1,237 1,501 1,754 1,858

Depreciation & Amortisation (325.6) (454.5) (457.4) (502.3) Cash/ST Investments 265 64 249 811

Operating Profit 35.7 137.2 369.3 530.2 Other Current Assets 236 248 305 351

Interest (Exp)/Inc (72.5) (89.5) (159.0) (199.2) Total Assets 3,994 5,638 7,605 9,376

Forex and exceptionals - - - -

Pre-Tax Profit (36.8) 47.8 210.3 331.0 ST Debt 486 435 435 435

Tax 126.0 256.5 317.8 345.6 Other Current Liabilities 761 1,132 1,414 1,644

Minority Interest - - - - LT Debt 1,510 2,530 3,686 4,551

Reported Net Profit (87.0) 304.2 528.2 676.6 Other LT Liabilities - - - -

Non-cash items 64.8 (258.1) (318.2) (347.1) Minority Interest - - - -

Core Net Profit (22.2) 46.1 209.9 329.4 Shareholders' Equity 1,237 1,542 2,070 2,746

Total Liabilities-Capital 3,994 5,638 7,605 9,376

Revenue Growth % 17.3 49.0 24.9 16.3

EBITDAR Growth (%) 17.1 63.8 39.7 24.9 Share Capital (m) 2,370 2,370 2,370 2,370

EBIT Growth (%) (27.2) 284.9 169.1 43.6 Net Debt 1,996 2,964 4,121 4,986

Reported Net Profit Grth (%) NA NA 73.6 28.1 Capitalised leases 2,277 2,226 2,008 1,796

Core Net Profit Growth (%) NA (307.8) 355.4 56.9 Working Capital 4,009 5,126 5,880 5,970

Tax Rate % 124.0 (83.8) (60.1) (51.0)


FY Dec 2013F 2014F 2015F 2016F

FY Dec 2013F 2014F 2015F 2016F

Profit before taxation (213.0) 47.8 210.3 331.0 EBITDAR Margin % 15.7 17.2 19.2 20.7

Depreciation 139.0 175.1 239.6 290.1 Op. Profit Margin % 1.5 4.0 8.6 10.6

Net interest

receipts/(payments) 72.5 89.5 159.0 199.2 Core Net Profit Margin % (1.0) 1.3 4.9 6.6

Working capital change 194.4 347.8 224.9 183.1 ROE % (2.4) 3.3 11.6 13.7

Cash tax paid 0.4 (1.7) (0.4) (1.6) ROA % (0.7) 1.0 3.2 3.9

Others (incl'd exceptional

items) (2.1) (89.5) (159.0) (199.2) Reported Net Margin % (1.0) 1.3 4.9 6.6

Cash flow from operations 191.2 569.0 674.3 802.6 Dividend Cover (x) NA NA NA NA

Capex (1,069.9) (1,743.4) (1,711.5) (1,347.8) Interest Cover (x) 0.5 1.5 2.3 2.7

Disposal/(purchase) 0.1 - - - Asset Turnover (x) 0.6 0.6 0.6 0.5

Others (238.6) 5.7 65.5 242.6 Asset/Debt (x) 2.0 1.9 1.8 1.9

Cash flow from investing (1,308.5) (1,737.6) (1,646.1) (1,105.2) Debtors Turn (days) 34.2 24.3 24.3 24.3

Debt raised/(repaid) 484.4 1,181.7 1,156.2 865.3 Creditors Turn (days) 54.0 54.0 54.0 54.0

Equity raised/(repaid) 722.7 - - - Inventory Turn (days) >> >> >> >>

Dividends (paid) - - - - Net Gearing (x) 3.2 3.3 2.8 2.2

Interest payments - - - - Debt/ EBITDAR (x) 5.5 5.0 5.0 4.8

Others (50.9) - - - Debt/ Market Cap (x) 1.1 1.7 2.3 2.8

Cash flow from financing 1,156.1 1,181.7 1,156.2 865.3

Change in cash 38.8 13.0 184.5 562.6

Free cash flow (878.8) (1,174.4) (1,037.2) (545.2)

May 09, 2014

C

OM

PA

NY

RESEA

RC

H |


Malaysian Airlines System (MAS MK)

Share Price: MYR0.22 MCap (USD): 1.1B Malaysia HOLD Target Price: MYR0.22 (+0%) ADTV (USD): 3.8M Aviation (unchanged)

1Q14F: Will be weak 1Q14 result will be out on 15th May. MAS will be loss making

due to a soft market and the impact of MH370 incident.

Management stated that 1Q14 yields were marginally lower

YoY, asserting our view that the cycle has bottomed in 4Q13.

Maintain HOLD with an unchanged target price of MYR0.22.

What’s New

The upcoming 1Q14 results on 15th May will be an inconsequential

event as everyone expects MAS to be loss making. The focus is on

the MH370 incident and the long term implication to the Company,

as well as management’s strategy to bring the Company out of this

muddle.

What’s Our View

This is an exceptionally difficult period for MAS. The MH370

incident has negatively impacted the airline’s reputation and this

greatly inhibits its effort to push for higher yields. Furthermore,

there has not been much clarity over the on-going costs relating to

the MH370 incident. We estimate an out of pocket expense of

MYR60-100k per day for the accommodation and other expenses

for the next of kin of MH370 passengers. It is difficult to make

earnings forecast for 1Q14 under the circumstances, we estimate

MAS will make a core net loss of MYR250-300m, down from a loss

of MYR340m in 1Q13.

Maintain HOLD with an unchanged target price of MYR0.22, which

is based on 0.9x FY14 P/BV, which is its trough valuation for the

past decade. We await the post results analyst briefing and clarity

over the MH370 incident before making any adjustments to our

earnings forecasts and fair value.

Key Data

Shariah status YES

52w high/low (MYR) 0.415/0.2

Free float (%) 29.6



Major shareholders:

KHAZANAH NASIONAL BH

69.4%

EPF 1.0%


1 Mth 3 Mth 12 Mth

Absolute (%) 7.3 (26.7) (36.2)

Relative to country

(%)

6.7 (31.0) (41.2)

Maybank vs Market


Market Recs 0 2 14


Target Price (MYR) 0.22 0.18 19.8

2014 Net Profit

(MYR m)

(221) (786) (71.9)

2015 Net Profit

(MYR m)

241 (455) (152.9)


FYE Dec (MYR m) FY12 FY13 FY14F FY15F FY16F Revenue 13,271 14,550 16,907 17,197 17,827 EBITDA 1,664 1,522 2,450 2,795 2,993

Core net profit (523) (1,083) (221) 241 481

Core EPS (sen) (16) (6) (1) 1 3

Core EPS growth (%) (58) (59) (80) (209) 100 Net DPS (sen) - - - - -

BVPS (MYR) 64.3 24.2 22.9 24.4 27.2

Core P/E (x) n/a n/a n/a 14.6 7.3 EV/EBITDA (x) 10.6 10.5 7.8 6.1 5.1

Net dividend (%) - - - - -

P/BV (x) 1.31 0.87 0.92 0.86 0.77 Net debt/equity (%) 344 195 246 204 144

ROAE (%) n/a n/a n/a 6.1 11.1

ROAA (%) n/a n/a n/a 1.0 2.1

Chg in net profit (%) - - - - -

Mohshin Aziz

(603) 2297 8692

[email protected]

1,500

1,575

1,650

1,725

1,800

1,875

1,950

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Feb-12 Aug-12 Feb-13 Aug-13

MAS MK EquityFBMKLCI Index

Resu

lts

Pre

vie

w

May 09, 2014 13


NCOME STATEMENT (MYR m) BALANCE SHEET (MYR m)

FY Dec 2013F 2014F 2015F 2016F FY Dec 2013F 2014F 2015F 2016F

Revenue 14,550.0 16,907.3 17,196.7 17,827.2 Fixed Assets 14,615.2 16,329.7 15,547.7 14,458.4

EBITDAR 1,522.0 2,450.4 2,794.5 2,992.8 Other LT Assets 1,354.0 1,354.0 1,354.0 1,354.0

Depreciation & Amortisation (2,082.7) (2,201.6) (2,119.4) (2,107.9) Cash/ST Investments 3,870.6 3,303.6 3,374.6 4,152.9

Operating Profit (560.7) 248.8 675.1 884.9 Other Current Assets 1,990.6 2,507.9 2,545.8 2,589.8

Interest (Exp)/Inc (436.6) (463.4) (434.3) (406.2) Total Assets 21,830.3 23,495.3 22,822.0 22,555.1

Associates 20.4 22.5 24.7 27.2

Exceptional Items 83.8 0.0 0.0 0.0 ST Debt 1,407.3 905.5 403.8 -98.0

Pre-Tax Profit (893.2) (192.1) 265.5 506.0 Other Current Liabilities 6,030.5 6,962.6 7,075.8 7,322.3

Tax (16.1) (29.0) (24.8) (25.3) LT Debt 10,359.3 11,815.1 11,289.7 10,797.4

Minority Interest (4.8) (4.8) (4.8) (4.8) Other LT Liabilities 6.0 6.0 6.0 6.0

Reported Net Profit (1,167.0) (221.2) 240.8 480.7 Minority Interest -24.9 -24.9 -24.9 -24.9

Core Net Profit (1,083.3) (221.2) 240.8 480.7 Shareholders' Equity 4,052.1 3,831.0 4,071.7 4,552.4

Total Liabilities-Capital 21,830.3 23,495.3 22,822.0 22,555.1

Revenue Growth % 9.6% 16.2% 1.7% 3.7%

EBITDAR Growth (%) (8.5%) 61.0% 14.0% 7.1% Share Capital (m) 1,671.1 1,671.1 1,671.1 1,671.1

EBIT Growth (%) 55.3% NA 171.4% 31.1% Net Debt 7,896.0 9,417.0 8,318.9 6,546.4

Net Profit Growth (%) 170.9% (81.0%) NA 99.6% Working Capital (1,576.6) (2,056.6) (1,559.1) (481.5)

Recurring Net Profit Growth

(%)

106.9% (79.6%) NA 99.6% Gross Gearing (%) 194.9 245.8 204.3 143.8

Tax Rate % (1.8%) (15.1%) 9.3% 5.0%


FY Dec 2013F 2014F 2015F 2016F

FY Dec 2013F 2014F 2015F 2016F

Pre-Tax Profit (1,167.0) (221.2) 240.8 480.7 EBITDAR Margin (%) 10.5 14.5 16.3 16.8

Dep. & Amort. 2,082.7 2,201.6 2,119.4 2,107.9 EBIT Margin (%) (3.9) 1.5 3.9 5.0

Cash tax paid (176.4) (176.4) (176.4) (176.4) Net Profit Margin (%) (8.0) (1.3) 1.4 2.7

Assoc. & JV Inc/(loss) (757.8) 414.7 75.3 202.5 ROAE (%) (34.9) (5.6) 6.1 11.1

Chg in Wkg.Cap. (8.0) (14.5) (12.4) (12.7) ROA (%) (5.5) (1.0) 1.0 2.1

Other Operating CF (828.2) (778.7) (668.5) (661.3) ROCE (%) (7.4) (1.3) 1.4 2.7

Net Operating CF (854.8) 1,425.5 1,578.2 1,940.6 Div Payout Ratio (%) NA NA NA NA

Capital Exp.(net) (3,660.9) (2,788.5) (307.2) 0.0 Interest Cover (x) NA (0.5) (1.6) (2.2)

Other Invts.(net) 1,187.5 0.0 12.8 12.8 Current Ratio (x) 0.67 0.72 0.75 0.79

Invts in Assoc. & JV 0.0 0.0 0.0 0.0 Quick Ratio (x) 1.86 1.85 1.95 2.11

Div from Assoc & JV 0.0 0.0 0.0 0.0 Net Debt/Equity (X) 1.95 2.46 2.04 1.44

Other Investing CF (27.5) 116.1 99.1 101.2 Debt/EBITDA (x) 7.73 5.19 4.18 3.57

Net Investing CF (2,500.9) (2,672.4) (195.3) 114.0

Div Paid 0.0 0.0 0.0 1.0

Chg in Gross Debt 2,218.1 954.0 (1,027.2) (994.1)

Capital Issues 3,074.8 0.0 0.0 0.0

Other Financing CF (476.3) (463.4) (434.3) (406.2)

Net Financing CF 4,967.6 884.4 (1,096.8) (1,063.7)

Net Cashflow

1,722.1 (567.0) 71.0 778.3

May 09, 2014 14


Research Offices

REGIONAL

WONG Chew Hann, CA

Regional Head of Institutional Research

(603) 2297 8686 [email protected]

ONG Seng Yeow

Regional Head of Retail Research


Alexander GARTHOFF

Institutional Product Manager


ECONOMICS

Suhaimi ILIAS

Chief Economist

Singapore | Malaysia


Luz LORENZO

Philippines

(63) 2 849 8836 [email protected]

Tim LEELAHAPHAN

Thailand (662) 658 1420 [email protected]

JUNIMAN

Chief Economist, BII

Indonesia

(62) 21 29228888 ext 29682 [email protected]

Josua PARDEDE

Economist / Industry Analyst, BII

Indonesia


MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers

CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

KANG Chun Ee (603) 2297 8675 [email protected] • Consumer

Ivan YAP (603) 2297 8612 [email protected] • Automotive

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional

Alison FOK (852) 2268 0630 [email protected] • Consumer

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer

Karen KWAN (852) 2268 0640 [email protected] • Property & REITs

Osbert TANG, CFA (852) 21 5096 8370 [email protected] • Transport & Industrials

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

Simon QIAN, CFA (852) 2268 0634 [email protected] • Telecom & Internet

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

William YANG (852) 2268 0675 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research

(91) 22 6623 2601

[email protected]

• Oil & Gas • Automobile • Cement

Anubhav GUPTA

(91) 22 6623 2605

[email protected]

• Metal & Mining • Capital Goods • Property

Urmil SHAH

(91) 22 6623 2606 [email protected]

• Technology • Media

SINGAPORE

NG Wee Siang Head of Research (65) 6432 1467 [email protected] • Banking & Finance

Gregory YAP (65) 6432 1450 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos

Wilson LIEW (65) 6432 1454 [email protected] • Property Developers

ONG Kian Lin (65) 6432 1470 [email protected] • S-REITs

James KOH (65) 6432 1431 [email protected] • Consumer - Regional

YEAK Chee Keong, CFA (65) 6432 1460 [email protected] • Offshore & Marine

Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)

WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips

John CHEONG (65) 6432 1461 [email protected] • Small & Mid Caps • Healthcare

INDONESIA

Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Anthony YUNUS (62) 21 2557 1136 [email protected] • Consumer • Poultry

Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement

Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

Lucky ARIESANDI, CFA (62) 21 2557 1127 [email protected] • Telcos • Media

PHILIPPINES

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy

Laura DY-LIACCO (63) 2 849 8840 [email protected] • Utilities • Conglomerates • Telcos

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Ramon ADVIENTO (63) 2 849 8845

[email protected] • Mining

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials

Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services

Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector

Sukit UDOMSIRIKUL Head of Retail Research


Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] • Banking & Finance

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics

VIETNAM

LE Hong Lien, ACCA Head of Institutional Research (84) 844 55 58 88 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 844 55 58 88 x 8180 [email protected] • Real Estate • Construction • Materials

TRUONG Thanh Hang (84) 844 55 58 88 x 8085 [email protected] • Consumer

Le Nguyen Nhat Chuyen (84) 844 55 58 88 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research

(84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

NGUYEN Trung Hoa, Dy Head of Retail Research (84) 8 44 555 888 x 8088 [email protected] • Macro • Steel • Real estate

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical

• Food & Beverage

May 09, 2014 15


APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate

and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than

the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank

Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking

statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit

business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only

under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the

perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the

Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You

should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any

responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

May 09, 2014 16


Disclosure of Interest

Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of May 09, 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph

16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of May 09, 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in

issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS

Analyst Certification of Independence

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder

Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable

of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system

BUY Return is expected to be above 10% in the next 12 months (excluding dividends)

HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)

SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES

Legal Entities Disclosures

Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng

Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange

Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank

KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

May 09, 2014 17


Malaysia Maybank Investment Bank Berhad

(A Participating Organisation of

Bursa Malaysia Securities Berhad)

33rd Floor, Menara Maybank,

100 Jalan Tun Perak,

50050 Kuala Lumpur

Tel: (603) 2059 1888;

Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd

9 Temasek Boulevard

#39-00 Suntec Tower 2

Singapore 038989

Tel: (65) 6336 9090

Fax: (65) 6339 6003

London Maybank Kim Eng Securities

(London) Ltd

6/F, 20 St. Dunstan’s Hill

London EC3R 8HY, UK

Tel: (44) 20 7621 9298

Dealers’ Tel: (44) 20 7626 2828

Fax: (44) 20 7283 6674

New York Maybank Kim Eng Securities USA

Inc

777 Third Avenue, 21st Floor

New York, NY 10017, U.S.A.

Tel: (212) 688 8886

Fax: (212) 688 3500

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof

59000 Kuala Lumpur

Tel: (603) 2297 8888

Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd

Level 30,

Three Pacific Place,

1 Queen’s Road East,

Hong Kong

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities

Plaza Bapindo

Citibank Tower 17th Floor

Jl Jend. Sudirman Kav. 54-55

Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,

Maharishi Karve Road,

Churchgate Station,

Mumbai City - 400 020, India

Tel: (91).22.6623.2600

Fax: (91).22.6623.2604

Philippines Maybank ATR Kim Eng Securities Inc.

17/F, Tower One & Exchange Plaza

Ayala Triangle, Ayala Avenue

Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities

(Thailand) Public Company Limited

999/9 The Offices at Central World,

20th

- 21st Floor,

Rama 1 Road Pathumwan,

Bangkok 10330, Thailand

Tel: (66) 2 658 6817 (sales)

Tel: (66) 2 658 6801 (research)

Vietnam In association with

Maybank Kim Eng Securities JSC

1st Floor, 255 Tran Hung Dao St.

District 1

Ho Chi Minh City, Vietnam

Tel : (84) 844 555 888

Fax : (84) 838 38 66 39

Saudi Arabia In association with

Anfaal Capital

Villa 47, Tujjar Jeddah

Prince Mohammed bin Abdulaziz

Street P.O. Box 126575

Jeddah 21352

Tel: (966) 2 6068686

Fax: (966) 26068787

South Asia Sales Trading Kevin FOY

[email protected]

Tel: (65) 6336-5157

US Toll Free: 1-866-406-7447

North Asia Sales Trading Alex TSUN

[email protected]

Tel: (852) 2268 0228

US Toll Free: 1 877 837 7635

www.maybank-ke.com | www.maybank-keresearch.com

malaysian aviation neutral -...

Documents