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Asia Aviation

1Q14: Down, but beat market from lower SG&A BUY

Asia Aviation Plc (AAV)

1Q14 net profit of Bt139mn beats market by 20% on lower SG&A. This represents

a fall of 65% YoY and 38% QoQ. Excluding loss from exchange rate, normalized profit

was Bt148mn, down 63% YoY and 15% QoQ. 1Q14 net profit accounts for 16% of our

2014, less than half the ~40% historical average, hit by politics. We expect AAV's

operations to improve in April-May after the lifting of the state of emergency and cost

controls such as lower marketing expense should provide some support from earnings

downside. We believe AAV's share price has factored in the negatives in the sharp 29%

fall against the SET's -4percent since Nov 1, 2013 when politics took over. We will provide an

update after the May 15 meeting.

Highlights:

Load factor was 80% in 1Q14, down from 87% in 1Q13 and 81% in 4Q13, as Available

Seat Kilometer (ASK) increased more than Revenue Passenger Kilometer (RPK).

ASK increased by 27% YoY and 6% QoQ due to fleet expansion (37 planes in 1Q14 vs.

28 planes in 1Q13 and 35 planes in 4Q13). RPK increased 17% YoY and 6% QoQ as

AAV carried 3.1mn passengers in the quarter, up 20% YoY and 5% QoQ.

Intense competition in the murky tourism outlook led to aggressive promotions

and this pulled AAV's average fare down to Bt1,712, -14% YoY and -7% QoQ.

Ancillary revenue per pax was Bt396, +3% YoY but -1% QoQ. The YoY increase was

driven by the fly-through service.

Cost of operations increased 24% YoY and 4% QoQ, aligning with the rise in ASK.

SG&A declined 11% YoY and 32% QoQ, mainly from lower marketing expenses.


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