Red plane has just turned Green? AAX Q1 2019 Quarterly report analysis
Airasia X’s business is mainly for long haul flights compared to Airasia which is mainly for shorter flight durations. But is it really worth charging cheaper for air tickets for long haul flights? From the looks of their IR and annual report AAX isn’t doing very well. That said their latest Q1 2019 reported an increase of 143.65% QoQ and 4.42% YoY.
Now lets talk starting from the biggest figure, their revenue. Revenue plunged by 8% QoQ, this is manly because of Share of results of an associate that AAX received from Q1 2018 that pushed up their revenue.
QoQ Revenue Down (-8%)
From 1.27 bil to 1.17 bil as stated in their Quarterly report
Their earnings before interest, taxes, depreciation and amortization (EBITDA) has increase substantially from 103,840 reported in Q1 2018 to a staggering 264,529 reported in this latest Q1 2019
QoQ EBITDA Up 154.7%
From 103.84 mil to 264.53 mil
Profit after tax has also increased by 4.4% compared to last year’s quarter was due to the fact that they had a gain from the Foreign exchange gains/(losses) section. That said, their planes Depreciation rose substantially from (27,327) to (214,915) in their latest quarterly report.
QoQ profit after tax Up 4.4%
From 41.49mil to 43.33 mil
AAX’s current asset also increased but lower increase compared to their current liabilities, this will lead to a higher dept to asset ratio which is not ideal, lets dive deeper.
QoQ current assets Up 5.17%
From 1.54 bil to 1.62 bil which is a rough increase of only 100mil. This is mainly due to Amounts due from related parties which they have collected cash or other forms of asset from their related companies and they have also increased their Derivative from financial assets.
QoQ current liabilities Up 31.48%
From 2.17 bil to 2.85 bil which is a significant increase, this is due to higher trade payables but mainly they have increased their borrowings from 192.32 mil in Q1 2018 to 882.91 mil in Q1 2019! Why? This is actually due to the leasing of new aircraft but why now only they show them leasing? They could have been leasing for quite sometime already but why it only shows this quarter? Its because of the new accounting standards implemented in 1 January 2019 which shows all leases on balance sheet while previously operating leases is off balance sheet, this is the reason of their borrowings which is only shown in this quarter.
Link to the new accounting standards.
https://www.pwc.com/…/ser…/assurance/mfrs/leases-mfrs16.html
Cash flow from Operating activities surged from 94.13 mil to 298 mil but how come they earned so much money from operations but their profit margin still so low? The key is under their “depreciation”, since they have deducted their depreciation in their income statement it is considered under non-cash items thus it will be put to their cashflow from operating activities. It is also due to the trade and other payables which is from 7.6 mil to 261.84 mil that caused their cashflow from operating activities to surge that much.
QoQ Cash flow from Operations Up 216.64%
From 94.13 mil to 298 mil
So in this cashflow from financing activities we can see that the repayment of borrowings has been increased which they have used their cash to pay back their borrowings but in their balance sheet we can see that they have increased their borrowings to pay off their debts and also to ensure that their cash reserves don’t drop so low. Cash and cash equivalents at the end of the period has dropped from 426.14 mil to 255.31 mil. Thus, they have increased their borrowings having more liabilities and also reduced their cash flow.
Cash at end of period Down (-40%)
From 426.14 mil to 255.31 mil
Key operating statics show that their seat capacity has been reduced -4% YoY and their passengers carried reduced -5% YoY, average fuel price per barrel has also been reduced so we can see the profit margin slightly increased. AAX also increased their number of aircraft to 36 in 2019 compared to last year 2018 was only 30. Eventhough average passenger fare int RM has gone down by -3% their sector flown has also decreased by -4% YoY.
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