Friday, February 24, 2017

Airasia: Most investors don't read details

Airasia just recorded a fantastic 4Q16 results as well as full year result.

The headlines however read below: Airasia posts 16% drop in Q4 profit.

Key Results for the 4th quarter. Between 4Q15 to 4Q16:
1.  Revenue / ASK (sen) improved from  14.81 sen to 15.71 sen an increase of 6%
2.  Revenue / ASK (US cents) improved from  3.38 to  3.58 an increase of 6%
3. Revenue dropped from RM2.167 billion to RM1.936 billion but it had a one off revenue item in 4Q15 i.e. recognition of lease revenue of RM727.9 million. Aircraft operating lease income for 4Q16 was RM381.2 million, which means that 4Q2015's additional one-off lease income was around RM400 - RM450 million. See below:

Included in aircraft operating lease income in the current quarter is maintenance service revenue which was not recognised previously due to uncertainty in the recoverability of the amount. With the improve clarity on the collectability of the amount, Management has decided to recognise the maintenance service revenue in the current quarter.

4. Cost / ASK (sen) reduced from 12.21 to 11.08 i.e. drop of  -9%

All of the above are the most important numbers and 4th quarter is a very important quarter as usually all airlines do well and it remains to be noticed whether the impact of competition would have affected companies like Airasia. Revenue per ASK increased while Cost per ASK reduced.

It should have been noted that

Ancillary Income Per Pax (RM) also increase from RM47 to RM 48 an increase of 2%.

Now, nobody talks of its high debt as it is getting smaller.

Now, if I am investor who look through details, I would have been delighted with the results. On the other hand, as probably expected from the headlines, it is the reverse. Stock price dropped, probably because of higher expectations (mind-boggling) and newspapers headlines.

There are 3 types of investors:
First, the institutions who will wait for the report from their analysts because probably they do not have time (because of portfolio too big). They get the first hand analysis first. But decision making is delayed because of some bureaucracy.

Second, the ones that get second hand information and in their first hand are the newspapers headlines and news. These are mostly retailers.

Third, the retailers and smaller institutions who do a lot of their own reading and research. I believe those are minorities.

Question is with that profile of investors, do you think there are still opportunities in stocks investments?


Anonymous said...

Hi , Felicity,

In one of your previous posting, you mentioned briefly about the reporting practice of focus lumber and magni tech.

Can you elaborate more on your findings of focus lumber and magni tech?

I would appreciate your frank opinion on both these companies.

Thank you

felicity said...


Don't get me wrong. These are perfectly fine companies. I have not been investing in them though as I do not understand them. I think Magni especially has been consistently providing dividends which is good for its investors.

I am not touching these companies though.

Anonymous said...

Hi, Felicity

Thank you for your speedy reply.

Both of these companies are in export business. Due to the weakening riggit now, there should be more interest in both of these counters.

Any special reasons that you are not touching them? Is it due to their financials?

felicity said...

Not so much their financials. Usually, I would also look at the management in my investment criteria. I wished I did not look at it for Magni-Tech, but I did. If you are among the business community in Penang - one would have heard of Tan Kok Ping, the person behind Magni. That's all I can say. As for Focus Lumber, I did not follow, but I reckon when people have been talking a lot of it, I guess best to avoid first as I probably came too late. Also for a timber business, I am not too familiar although I know it is a export business. There are many timber companies and some of them I tend to avoid - e.g. WTK.
Some of these timber companies do not put investors as their partners. Again, that's all I can say. For this, I am not sure about Focus Lumber.

Anonymous said...


Thank you for sharing the info with me. Appreciate it