Saturday, December 04, 2010

A Look At AirAsia Stellar Earnings

Back in early Aug 2010, I gave AirAsia credit. Yeah I did. LOL!

In the posting Positive Move That AirAsia Defers Their AirBus Order, I said the following...

  • However, let me say this, I have to give AirAsia some credit for eating the humble pie and for successfully persuading AirBus to allow them to defer the delivery of the air crafts and more so, this move really gives them a fighting chance to survive and to overcome their insanity of building a company which was clearly over burdened by the immense corporate debts they took upon to finance the building of their business.

    Yeah.. AirAsia should be ok for the next one year or so... yeah.. this is a POSITIVE CORPORATE exercise... it's certainly extremely crucial that AirAsia made this postponement of delivery.... but... deferring is only a postponement.... and in regardless, these air crafts order still needs to be delivered!

And AirAsia the stock had done fairly well since then. (LOL! That would be some major understatement for some)

Air Asia announced its earnings last week.

Was it good?

Everyone thought it was fantastic.

But... but... was it really spectacular for me?

Now since Air Asia had 'borrowed' or perhaps the more elegant word to use is 'financed' its success via massive borrowings, I for one, thinks that it's rather crucial to pay attention to its balance sheet and observe the cash/debts level. And also, since Air Asia had committed itself to a massive aircraft order, observing the capital commitment level is just as crucial.

( * for the record: AirAsia became the world's biggest customer for the Airbus A320-200 after placing an order for 175 aircraft in December 2007, with an option for 50 more. *)

Mentioned in that Aug posting...

  • Anyway... a postponement is a postponement is a postponement. Come 2014 (last August AirAsia deferred 8 AirBus to 2014) and 2015, these air crafts still needs to be delivered. Which means, from now till then, AirAsia still needs to ensure that it builds up its cash flow to ensure it can accept delivery of these air crafts that they had ordered. Unless of course, AirAsia can pull off another miracle by asking AirBus to allow them to defer yet once more. :P
    ps: yeah, AirAsia X listing would indeed help AirAsia financials. It too is required. And it is the ONLY OTHER logical and sensible option for AirAsia to rescue its dire balance sheet

Here's AirAsia updated numbers.. (the format of the table would be the same as in the posting Just How Profitable Is AirAsia Since Listing? )

* fy 2007 numbers is a mess because AirAsia changed its financial year end *

Now I may be wrong but I would NOT discount the following from AirAsia earnings. Yes, the earnings table above includes all of these...
  1. Forex translation gains
  2. Derivative gains/losses in oil hedges
  3. deferred tax benefit granted to AirAsia
  4. I am lazy! :P

( the forex translation gains is a lot for this quarter, yes? )

So AirAsia 'total earnings' for fy 2010 Q3 stood at some 327.286 million. How impressive is that?

The cash/debt level, has it improved?

The c.c or capital commitment column 'improved'. Would I pay attention to the value? Or should I pay attention to the number of aircraft to be delivered?

To put this capital commitment into simple perspective, on June 2010, from the posting How Good Is AirAsia's Latest Earnings?

But some would compare current Q3 cash/debts versus end FY 2009 numbers. Yes, some would compare the current balance sheet versus what AirAsia had end of last fiscal year and when one makes such comparison, AirAsia balance sheet certainly had improved, yes?

But.... then.... one should also take into consideration that AirAsia raised some 509.217 million from its share placement sale done end FY 2009.

And then the Amount Owed By AirAsia Subsidiaries! issue.

The current Q3 earnings notes showed that there is certainly much improvement in this area. Yeah, its subsidiaries is paying back the money owed...

The financial (cost)/income table is certainly interesting eh? ( see page 25 of AirAsia's earnings notes)