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.

5 comments:

谭振聪 said...

long time no see, brother, thought u would hv some good recommendation after charging for a quite a while.

Im quite disapointed though, so many stocks u dun buy, u buy Airasia!?

MAS's reformation for sure will threaten the survival of AA, that simple.

Last time, AA thrives last time at the expense of MAS's lazyness, now no more story dy

Guy Fawkes said...

Hi felicity, saw your recent portfolio return. What changes would you make to your portfolio if you are able to turn back the clock to early 2015?

felicity said...

Its timing, I hope I timed the purchases (or sales) much better. However, I do not really look at market timing as my real concern is the stock itself.

My purchases look at market opportunity and the parties who are delivering the businesses.

felicity said...

On MAS reformation - it will create more opportunities for Airasia as MAS itself is shrinking. What Tony Fernandes said is true, and I believe, MAS was throwing prices. If you noticed the ticket prices over the last few months, they have gone up despite low fuel prices.

MAS will no longer be the largest air passenger carrier in Malaysia, Airasia will. Similarly, in many countries, LCC will act as the largest passenger carrier replacing the traditional carriers due to business model. You can check the last report by Malaysia Airport on August passenger traffic. KLIA2 has taken over as the main airport hub, KLIA is losing ground. Why? Because of LCC.

SIA, Thai Airways will all be affected.

Airasia dropped so much is a huge opportunity, I believe and as always I do not look at tomorrow. I look at longer term.

James Chang said...

Hi Felicity, good decision made, sell Padini buy Airasia. As individual investor, our fund size is limited, sometime we need to made give and take decision to ensure our return is outperformed. As compared big fund manager, We have advantage on flexibility to switch when buy opportunity appeared. Keep it up!