Took a snap shot of the Balance Sheet.
Like others, I am puzzled why Deferred Taxes is considered an asset.
Anyway, as per AirAsia own accounts, its accumulated deferred taxes as at 31st March 2009 is at a whopping 935.521 million.
( I had mentioned in my own flawed thinking that if AirAsia had to pay these taxes, then the Malaysia government would have MORE money to spend on fiscal policies and in the long run, such money would be a boost for all MALAYSIANS)
Now as stated in the posting Again On AirAsia's Deferred Tax Iss, according to research reports, AirAsia stands to benefit 18 BILLION in deferred taxes!
Now I would like to do a simple exercise. Let's see how much AirAsia has earned so far.
Today I am doing something different.
I will discount all the losses and profits from AirAsia hedges in forex and oil hedges.
Why you may ask?
Well.. hedging is always going to be part of AirAsia's activities. The boss can say a minute no more oil bet but no matter what AirAsia will still have these hedges in their books. So I am NOT going to treat them as extraordinary items. This would be my flawed thinking for the day. :D
And for simplicity sake, I would just count in all these deferred taxes as gains or losses for the time being.
And for simplicity sake, I just use the unaudited numbers and risk the deviations in audited and unaudited accounts.
So the first quarter of 2009, Quarterly rpt on consolidated results for the financial period ended 31/3/2009 AirAsia said it made 209 million.
Feb 2009 Quarterly rpt on consolidated results for the financial period ended 31/12/2008. AirAsia lost 471.739 million for fiscal 2008
Now it's 2007 accounts is muddled because it changed financial year end. So I will just use its the numbers from the above quarterly earnings. And as you can see AirAsia said it made 697.623 million.
August 2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006 AirAsia said it made 126.943 million. The previous year it made 111.557 million.
Adding the numbers up: 209 + (-471.739) + 697.623 million + 126.943 + 111.557 million = 673.384 million.
Now remember this 673.384 million consists of all the hedging losses/gains and the deferred tax gains.
Now remember from Airasia latest quarterly earnings, its CURRENT total deferred taxes asset is at 935.521 million!!!!
Well here comes the shocker.....
If we minus the deferred taxes from AirAsia's profits... how much has AirAsia has made since listing?
Try 673.384 million minus 935.521 million = _____________ !!!!!!!
So can anyone tell me just how well is AirAsia doing???
Is it doing very well?????
Now let's look at its cash/debts issue.
This is AirAsia's first ever quarterly earnings since listing. Quarterly rpt on consolidated results for the financial period ended 30/9/2004
It had piggy bank cash balances of 78.441 million. Total loans stood at 95.456 million.
Its most recent quarterly earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009
Piggy bank cash balances now is at 223.991 million. Total loans stood at 6.934 Billion!!!!!!!
How?
If I say I am not impressed, do you think I am flawed?
And just how well is AirAsia is doing?
Are you impressed with such a business model?
Dear Moolah,
ReplyDeleteInteresting analysis :)
As to your question, IMHO deferred tax assets are supposed to be recognised only when it is highly probable that it will be realized in the forseeable future.
For example, if a company has been profitable for 10 years in a row and then incurs a large CAPEX and/or huge losses in year 11, you can say that these amounts are 'assets' since they are effectively 'tax savings' which will be realized in future years (years 12 and beyond).
Granted, recognition of the deferred tax assets hinges on a very important assumption, that is the company will continue to be profitable in the future (the co. past track record may be a good indicator of this).
For Air Asia, this assumption might not hold true. So, it may be prudent to discount this amount from the Balance Sheet.
Privately, I disagree with the necessity of the deferred tax concept in the first place. But that's a story for another day :)
Rgds
Thanks for sharing your viewpoints in the deferred tax assets.
ReplyDelete:D
No problems :)
ReplyDeleteYour enthusiasm on analyzing financial reports and the economy is amazing. I need to be as diligent as you to be a better investor.
Rgds