Friday, July 31, 2015

Keuro: Audited Accounts mistake

Just had a quick run through of Keuro's audited account put up today. I believe there is a mistake on the total assets for Radiant Pillar's net assets (page 64).

If the amount is actually RM1.94 billion would have been fantastic.

Thursday, July 23, 2015

Airasia's comparisons against others

I am wary of the fear in investing into an airline given the past experiences of many collapses - and Malaysia Airlines has been our closest example. Thai Airways did not fare well either. The list goes on and on. But those are the traditional airlines and their possible collapse could be due to the proliferation of low costs model. Airasia's drop however warrant me to look deeper into the company as I feel that it is managed by people who are capable.

Let's look at comparison of Airasia's successful peers (except for Tiger) than look at the non-performing ones. I have taken some examples of Ryanair, Easyjet, Cebu Air (Airasia's top furious competitor in Philippines) and Tiger Airways. Why did I chose those?

Ryanair - model low costs airline operating only in Europe
Easyjet - second to Ryanair and hugely successful as well
Cebu Air - as mentioned, Airasia's top competitor in Philippines. It is dominant there and Airasia is having a tough competitor. But it is predominantly a Philippines airline.
Tiger - well, nearest financially available competitor to Airasia. Not very successful and it needed injection of capital last year.

The significant names that are not here - Southwest (largest low costs in the world and operating only in US) and Lion Air (not listed). I did not pick up Southwest because over the last year, non-US airlines have suffered from the appreciation of US Dollar but benefited from the huge drop in oil price. US Dollar of course appreciated against many currencies and Malaysian Ringgit suffered the most. However, if one is to believe that USD could not appreciate much further, this forex losses will stop. No single currency will appreciate the way USD appreciated in the last few months and continue to appreciate. Think of what the consequences would be to US economy if that happens.

Anyway on the numbers, I have picked up revenue operating gain / loss, GP and shareholders funds. Why I did not use Net Profit is due to the forex loss that some of the companies experienced including Airasia which I do not think will be a long term thing. Fundamentally it is how well the company manages the gross margin as well as the fuel hedges.

The accounting policy for foreign exchange for Airasia is as below.


As below are the important numbers for the list of companies.

Airasia's of course is the Malaysian operation only where it can consolidate the numbers. Others are based on equity accounting.
While one can understand that Airasia's balance sheet is not that strong as compared to its stronger peers like RyanAir and Easyjet, I do not think that it is cashflow starved. One should note that Airasia's business model is to collect cash upfront and pay later. There is a period where it is benefiting from customer financing and that business model is great especially if applied to one's advantage. Airasia, to some extent have managed to use that to its advantage.

And based on its market value to its book value, would it be a reason to buy? Personally, I would say yes, especially for an airline which is still growing. There should be continuous competition but gone are the days where "everyone wants to own a low costs airline" as the barriers of entry is getting much much tougher.

Remember, the stock market in the short run is a voting machine, but in the long term is a weighing machine. What's substance is more important. Think of Airasia's substance.

Tiger Airways 1Q16 results

Tiger Airways is the first to announce its quarterly (courtesy from TheEdge Singapore). Although quarterly results is not an important thing, the long haul business perspective is more important, one can get a hang of what the regional airlines are performing. This could provide a gauge of what could be in store for Airasia and Airasia X.

On comparison perspective, Tiger Airways is valued at SGD824 million (RM2.293 billion), not too far from Airasia ya which is around RM3.7 billion. Which is a much bigger airline and on a more important note, what has Airasia achieved against Tiger. Airasia now is below NTA. Tiger is around 3x NTA.

Wednesday, July 22, 2015

Fantastic headline

For those whom have not read the article, please get it from here.

Alternatively, you may also want to read the statement from RAM themselves.

Tuesday, July 21, 2015

About Airasia

Before one have negative thoughts on Airasia's operations, lets see some of its perspectives.

  1. It is the largest low costs airline in Asia, yes?
  2. Who in the region is its largest competitor? Lion Air? SIA's bunch of holdings - Scoot, Tiger etc? Why would SIA be interested in a low costs carrier, anyhow?
  3. Who else is able to have partnerships in and multiple hubs in other countries besides Malaysia? Airasia has Thailand, Indonesia, Philippines, India. 
  4. Name one business which will make tonnes of money from year one of operations. On this think of Indonesia and Philippines. Is Indonesia esp. a key operations hub for Airasia. If yes, is it important for Airasia to focus on its operations there?
  5. Airline is a tough business. True especially for many American airlines and some national airlines, but some low costs do very well. Check out Southwest, Ryanair, Easyjet.
  6. Is Asia a key growth area for many suitors? Think strategic investors. If no, why did Heineken, (was it) bid extensively for F&N's brewery in Singapore? Why does AEON look at SEA as a key investment destination?
  7. Is there stronger growth in Europe and North America than Asia (especially South East and East Asia)?
  8. Is Airasia better off today than it was say 3 - 5 years ago? Lower oil price (What's the impact of Iran on the price of oil in the future?). Airasia today with better reach. More key partnerships. These are progress. No?
  9. MAS comes to its senses? It needs to turn profitable, now - remember MAS was losing a billion ringgit a year.
  10. Is its current price lowest ever for a long long time?