Friday, November 20, 2009

Massively Disappointed With AirAsia's Earnings

AirAsia announced its earnings tonight.

I saw the link and I took a guess of what to expect.

  1. I expected them to show some earnings. Why? The USD had weaken a lot against the ringgit and this would translate to forex gains.
  2. I expected some improvement in the balance sheet. Why? AirAsia sold shares to raise funds. If not mistaken the share sale would bring in some 500 million in cash.

Those were my humble expectations and since I had blogged quite often on AirAsia, I only thought it was correct that I made an update on its earnings.

I quickly look at the summary from DJ.

A net profit of only 130 million? Only 130 million?

This simply isn't enough! That was my first reaction. No joke!

I opened the pdf file attached and looked for its core operating profits.

Page 10.

That screen shot spoke everything about AirAsia.

Taking out the forex gain, core operating profits were only 33.834 million.

Is it enough?

Consider all the investment outlay that AirAsia had taken. Consider the mountain of debt AirAsia is in.

Is a core operating return of 33.834 million enough?

Point 2 or expectation number 2.

Firstly on Aug 2009, I wrote the following:
A Quick Look At AirAsia's Latest Earnings

Cash balances then was 231 million ( See
here ) and total borrowings as at Aug 2009 were some 6.957 billion ( see here )

Today, November 2009.

Cash balances has increased to a nice 527 million.

But is this enough?


Why? Because AirAsia cash balances were boosted by some 508 million from their share placement sale. Minus this out, AirAsia cash balances is only left with 19 million! Remember in Aug 2009, cash balances were some 231 million!

Where all the money go?

Then let's look at their borrowings.

Total debts is now 7.2 Billion!


So despite raising some 508 million from a share placement sale, AirAsia balance sheet continued to weaken!

Back in Aug, I mentioned in the posting
A Quick Look At AirAsia's Latest Earnings on the amount due to AirAsia from its associates.

I wrote the following.

  • Look at the amount due from the 'jointly controlled entity and amount due from associates' which stands at 410.408 mil and 479.593 mil respectively. The amount totals 890.001 million.

Now if you look back at the earlier table which showed AirAsia cash balances, the "Amount due from a jointly controlled entity" totals 438.339 million and the "Amount due from associates" totals 472.722 million. Adding both totals, we get 911.061 million!

Holy cow!

Why is this happening?

With the mountain of debt AirAsia is in, should AirAsia allow its associates to owe them so much million? 911.061 million is one mountain of small change!

What on earth is happening with this company???


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