Thursday, September 10, 2015

Buy Airasia

A stock which I have been looking at for a long time - have previously purchased and sold cause I felt that others could have gained more.

It has been sold down crazily due to fear as well as foreign selling so much so that many is thinking that it would have collapsed. This is definitely not me chasing the stock. However Airasia has seen substantial rebound from its down previously. If I am not mistaken, it has gone to below RM0.78 - something unthinkable of.

This is a company which has built value over the years and to trade at substantially below its Net Asset Value of RM1.70 is crazy. But the market has been crazy. I definitely have taken some buying position but not in this portfolio.

Globally, economy is not getting better, but essentially that's good for a low costs airline right? I still believe that Low Costs is the way to go. Or shall we say the ways airlines will operate in the future will change - or already on the way. It is not low costs but more like minus the frills.

Southwest Airlines has been benefiting from low prices of oil and so are many other airlines companies especially the Ryanair, Easyjet etc. Airasia, Lion Air, Cebu Air are all going to benefit the same as their model is based on providing less for a lesser fee. Hence it makes the fuel costs to be a significant portion of the costs for these airlines. When fuel price drop by more than 50%, that essentially brings benefits to these players.

For Airasia, the weakening of RM will bring some causes of concern but it has managed to hedge some 52%+ of its exchange risks. I am also seeing that it has managed to build its cash position but delaying or foregoing purchasing of new planes. This is probably due to the glut of planes for lease as well as slowing down of its expansion.

I think the breather is good as it will provide Airasia time and avenue to replan and stabilize. All in all, I am pretty bullish of its future despite it climbing back from its low of RM0.78. At RM1.12, it still has a lot to climb in the short to medium term. Longer term, Airasia is the way and model to go.

Sell Padini

Felt that much more could be gained from some other stocks. Although Padini is a good company, there are others that are getting much more attractive now. In the future, costs is playing a big role despite prices of commodities like cotton is already substantially down.

Economy is definitely slowing as we can see in Malaysia and regionally.

Hence decided to sell all of Padini at RM1.41. It is sold at a loss despite the company providing consistent dividend. I am definitely selling to buy something else.