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Investment analysis airasia berhad

1.0 Market analysis

Before we can continue farther in make up one’s minding whether puting in AiraAsia is a good pick or non, we have to make a market analysis on the market status of the air hose industry. Our market industry is based on five chief elements which are:

1. Legal

Like all industries in the market, the air hose industry is besides tied to certain legal policy of the authorities so as to guarantee the safety and the consumer ‘s rights. For the air hose industry worldwide, the regulations and ordinance are set by the International Civil Aviation Organization and is revised from clip to clip. The regulations and ordinances are largely about flight ‘s safety measurings and besides the direction of safety during flight such as doing the Providence of first-aid kit compulsory on every aircraft in instance anything go on during flight. Not merely that, the air air hostess and air steward must hold basic cognition of first assistance.

2. Politicss

Politicss play a major function in the public presentation of the air hose company every bit good. Any political policy that is to the air hose company ‘s disadvantage will impact the public presentation and one-year net income of the air hose. When the really first air hose company was established in Germany, which is Deutsche Luftschiffahrts-Aktiengesellschaft ( DELAG ) , on 16 November 1909, it was under Germany ‘s authorities service. But as the twentieth century attacks, air hose companies are ‘deregulated ‘ . Airline deregulating harmonizing to the Wikipedia encyclopaedia is the procedure of taking entry and monetary value limitations on air hoses impacting the bearers permitted to function specific paths. Airline deregulating began in the United States of America in 1978 and from there exist the Airline Deregulation Act 1978 whereas for Europe, deregulating merely began in the 1990 ‘s. Before deregulating happened, the air hose company has to stay by the instructions of the authorities refering the paths and the pick of which airdromes to set down on and go from. Whereas after deregulating, the air hose company has the freedom to take any paths that they want and whichever airdromes that they want to stopover at.

There are pros and cons to the deregulating of the air hose company. The pro is the air hose company has the freedom to make up one’s mind on the operation of the air hose whereas the con is that the entry barriers for new air hose entrants are lower. Therefore, making a more competitory market for established air hoses. This is when the low cost bearer air hose starts to look in the market, such as Tiger Airway ( Singapore ) , Jetstar Airways ( Australia ) and Pacific Blue Airlines ( New Zealand ) . The visual aspect of these air passages will take down the net income border of the bing air passages as Low Cost Carrier ( LCC ) air hoses tend to monetary value their airfare at the really minimal monetary value as possible.

Another political facet is the being of bilateral understandings between two or more states sing the authorization of way stations at different airdromes. Bilateral understanding is usually based on the construct of ‘freedom of thee air ‘ where it gives the air hose the freedom or rights to wing in the air infinite of another state and besides be permitted to halt at the airdromes of their pick. And sometimes, some state may even let foreign air hose to run on their domestic paths, but this is really seldom to be found. This move by the authorities will take many of the barriers to competition and leting their ain air hoses to hold foreign spouses or codification sharing spouses. This will further increase the air hose entree to more international paths and besides farther exposed the air hose to foreign states. Both the air hose deregulating policy and the bilateral understandings play a major function in finding the prosperity of an air hose company. A policy set by the authorities may suppress or help in the success of an air hose company.

3. Economicss

When we look at the economic side of the market, we will first expression at the overall Gross Domestic Product ( GDP ) in the universe. GDP is the value of all concluding goods and services from a state in a given twelvemonth. GDP is the best tool to utilize when accessing the public presentation of a state as it takes all the industries and merchandises into consideration. A few of state ‘s GDP and the part of agribusiness, industry and services to the sum of GDP are listed in the tabular array below.


Growth rate ( % )

Agriculture ( % )

Industry ( % )

Servicess ( % )






United arab republic








































Beginning: CIA The World Factbook and Wikipedia Encyclopedia

All the states have different GDP, some states may hold negative growing and some states have positive growing. This is normal as during 2008 is when the fiscal crisis happened. But non all states did non profit from the planetary economic system downswing as some states have positive growing rate for their GDP. This may be due to the fact that the states benefited from industries that bring losingss to another state which consequences in a trade-off between the benefits between states. The services industry contributes to most of the sum of the GDP of the states listed above except for China, Nigeria and Thailand. All three of these states are more focussed on industrial industry which may be due to the fact that these states have more laboured intensive industries. Therefore, this shows that service industry plays an of import function in the public presentation of a state and service industry includes air hose industry.

From the GDP of a state ; we can look at the buying power para ( PPP ) of the consumers. If the GDP of the state is low or is a negative value, this means that the PPP of the citizen is low and frailty versa. The PPP of consumers can besides be linked straight to the rising prices rate of a state. As the rising prices rate addition, the PPP of consumer will drop. Inflation rate will increase the monetary value of goods in general as the demand exceeded the supply of the goods. Therefore, diminishing the sum of excess money allocated for epicurean goods which besides include going and amusements. So the alterations in the GDP of a state will impact all the industries, including the air hose industry.

There are times when non merely the GDP will impact the public presentation of an air hose ; it may be due to natural catastrophes which include temblor, tsunami and flash inundation which have been go oning rather often nowadays. All of these can interrupt the operation of the air hose companies as installations and airdromes possibly destroyed in the procedure. Therefore, doing an air hose company to face loss in the event of natural catastrophes. Another event that might impact the economic public presentation of an air hose company is terrorist act such as the event of the doomed twenty-four hours of September 11, 2001where American Airlines and United Airlines was hijacked. This had caused both air passages to confront immense losingss due to the diminution in value of the air passage ‘s stocks. This can reflect the assurance of the clients towards both the air hoses had declined highly as an wake of the hijacking event. Below is the graph picturing the alteration in stock monetary value for both companies.

4. Sociable

As the old ages goes by, consumer demands are germinating bit by bit. The consumers nowadays want anything that is their convenience, inexpensive and can be done immediately without traveling through painstaking processs. So as to suit the alteration in the demands of the clients, the air hose company has to improvize themselves from clip to clip.

Most of the air hose companies presents have their ain web sites. This is to do it easier for the consumers to look into the handiness of tickets, the agenda of the air hose and besides enabling the consumers to buy their ticket through e-ticketing. All of these are to the clients ‘ convenience. So as to pull more clients, some air hoses are now practising on-line check-in of baggage where baggage can be checked-in within 24 hours of the scheduled flight.

Social and economic factors are closely related to each other as any alterations in the market economic system will straight impact the consumer behaviour. As stated above under the economic factors, the event of fiscal crisis will impact the PPP of the clients as monetary values of goods have been increased due to rising prices. In order to salvage more money, consumers will choose for cheaper goods. The same goes to the purchase of airfares. The lower the airfare is, the better it is and this even applies to concern travellers going on premium category.

This can be proven by a survey done by the International Air Transport Association ( IATA ) where it shows that the consumer ‘s pick of seats have changed as the figure of premium category travellers have decreased. This can be seen clearly from the graph below.

The graph shows that the figure of premium riders had started to fall since July 2008 and keeps dropping until sometime in may 2009 before it the figure of riders going on premium category starts to increase bit by bit. Even though there is an addition of riders going on premium category, it still takes clip for the air hose company to bounce back from the immense sum of losingss that they have incurred.

5. Technology

With the promotion of the technological alterations in the universe, the engineering used by the air hose company besides improvised with clip. In the yesteryear, whenever the clients wanted to purchase air tickets, they will hold to travel to either the air hose ‘s office or any travel bureau to buy their tickets. But now, clients can merely buy their ticket with a chink of the mouse. They do non even necessitate to step out of the house, as long there is internet available. Advanced check-in can besides be done through the cyberspace 24 hours prior to the flight going. All of these engineerings are to the consumers ‘ convenience.

Promotion in the engineering of the air hose industry can besides be seen on the safety and the comfort of the aircraft. Aircrafts presents are more comfy, safer and in-flight amusement is besides provided for long draw flights. This is really different from the olden aircraft where the chief intent of the aircraft is merely to transport riders from one point to another. Both the Airbus and Boeing Company are improvizing their aircraft from clip to clip in so as to guarantee that their aircraft is the best in footings of safety and besides the comfort degree.

Airline companies in the market are besides utilizing the promotion in engineering to implement hazard direction by supplying good and dependable databases for hazard analysis and targeting, supplying faster and more effectual concern procedures, more efficient recordkeeping and supplying better services to the clients.

2.0 Airline Industry Analysis

The air hose industry had ever been a extremely regulated industry from the beginning of its constitution. The deregulating or liberalisation motion ab initio started in the US in 1978. Governments normally treat the air hose industry otherwise compared to some other industries due to the sensitiveness of the air power concern, which involve some national security and sovereignty issues.

In this study, Porter ‘s Five Forces Model is being used to analysis the air power industry construction to supply an overall position of the industry. This is a well-established theoretical account, in which the industry can be simulated as a theoretical account influenced by five different factors called ‘forces ‘ as shown in Figure 1.1. A suited dynamic interaction of these five forces shapes the basic construction to find the profitableness and attraction of the industry.

2.1 Industry Competitor

The grade of competition is one of the most of import factors that finding profitableness of the industry. The market growing and figure of rivals are some of the causes that will impact the industry competition. For the air hose industry where its fixed cost is normally really high and the variable cost is low, competition is ferocious as air hoses are seeking to bring forth gross to make break-even degree in order to last.

Competition in the air hose industry can be divided into competition between low cost bearers ( LCCs ) and full service bearers ( FSCs ) in both regional and domestic markets. There are 6 budget air hoses in Malaysia which are Air Asia, Firefly, Tiger Airways, Cebu Pacific, Jetstar, and Lion Air. The competition among low cost bearers is normally fiercer as offering the cheaper airfare is extreme of import for them. One of the chief grounds that riders choose to utilize a LCC is “cheaper airfares” . Since most of the low cost bearers do non hold frequent circular plan to enforce exchanging cost on clients, it is instead hard for them to construct up client trueness except invariably offering a cheaper airfare to retain their clients.

On the other manus, there are a tonss of full service air hose in Malaysia such as MAS, Cathay Pacific Airway, China Airlines, Eva Airways Corporation, and so on. Thus, the competition between full service bearers is more complicated. This is because FSCs are viing in many facets of their services, such as web coverage, flight frequence, and service quality and ticket monetary values. While the competition between FSCs and LCCs are chiefly focused on pulling each other ‘s market as they normally have different client groups. Customer base of LCCs are mostly made up of leisure traveller while FSCs appear to be more attractive for concern traveller.

2.2 Suppliers

Suppliers are those who provide necessary natural stuff, equipment and labour for an air hose to execute their day-to-day operation. Supplier ‘s strength can greatly impact the industry ‘s profitableness, if there is a high concentration in the provider power, they can exercise influence on air hoses therefore increasing their bargaining power. Major inputs for air hose to supply their services to riders are aircraft, labour, fuel and set downing slots. The fleet is the most of import assets for air hoses to bring forth gross. However, there are merely two major aircraft makers in the West, Boeing and Airbus, which about monopolising the widebody aircraft civil conveyance aircraft market worldwide. Hence, the deal power of aircraft makers against air hoses remains really strong, as the concentration of aircraft provider market is really high.

Some air hose employees are considered as extremely specialized and professionals, such as pilots and aircraft technicians. Due to their specialisations, it is about impossible for an air hose to happen replacings for pilots or care workers in short clip, which may do an addition in the bargaining power of their employees over the air hoses. In this respect, the labour cost is one of the biggest operating costs of most air hoses. However, cutting cost is the chief docket of air hose presents, and the labour cost is ever the first to be the victim.

2.3 The Buyers Power

The purchaser ‘s power is defined as the influence that clients can hold on the air hoses gross impacting ticket monetary values and service charges. If the purchaser ‘s power is strong plenty, clients can put the ticket monetary value, and frailty poetry. Strong purchaser power can dicker off possible air hose net income and pull out other benefits from air hoses such as quality-improved services. Some of the favourable factors to strong purchaser ‘s power in the air hose industry are comparatively low client shift cost, low merchandise distinction, and freely available information on Internet. Nevertheless, the purchaser ‘s power may be weaken by low purchaser concentration or little purchase volume. Although ferocious pricing war difference among the air hoses, it is notably that purchasers do non play proactive functions in the pricing war. Current monetary value impacts in the market is aimed to maintaining the air hose ‘s rivals out of the market instead than supplying the low pricing power of the air hoses to their clients. Besides, travel agents, who normally buy air tickets in big volume, output greater power but they use this construct to beef up their place in the market instead than reassigning the cost benefit to costumiers.

2.4 New Entrant

“New entrant” refers to any new participant in the air power market which will vie with the officeholders. A cardinal standard to analyse the menace of new entrant in the industry is to analyse the degree of entry barriers. Entry barriers are obstructions that may deter others from come ining the market hence affect the competition of the industry.

New entrants will besides take down the possible net incomes of the industry as a whole. Most common entry barriers in air hose industry are ordinance limitations, labour, entree to distribution channels and high capital demand. However, the entry barriers to the air hose industry had by and large been lowered late, particularly on the ordinance limitations and distribution channels.

The illustration of new entrant to Low Cost Carrier s is Firefly air hose, which was growing late

and go a strong rival to Air Asia air hose.

2.5 Substitutes

“Substitution” represents the menace that other industries or transit may offer a merchandise, which can replace air conveyance. The menace of permutation depends on the type of flight, viz. long draw or short draw, and travel aim such as concern or leisure. For short draw and leisure travel, the chief permutation menace in the Asia Pacific comes from surface conveyance such as route and sea conveyance. Even though some of the airfares from LCCs are lower than coach menu, but after paying for the airdrome charges and insurances, clients will happen that by and large the entire cost of air travel is still higher than that of route conveyance. Although surface conveyance is cheaper in term of money, it still costs the rider more in footings of clip and efficiency. Furthermore, route conveyance by and large will non vie with long draw travel, particularly for cross state going.

On the other side, latest engineering innovations such as videoconference pose a bigger menace for concern travel. In the wake of 911, many concerns that the air hose industry will be substituted by picture conferencing companies as they assumed that people will be less volitionally to go since so. However, the speedy traffic recovery proved them incorrectly. Although the international rider flow have n’t returned to the pre-crisis degree, but it seems the recovery is on the right way.

2.6 Low Cost and Budget Airline – Air Asia Berhad

Air Asia is one of the largest low menu and no frills air hose. in Low Cost Carriers ( LCC ) industry which supplying invitees with the pick of custom-making services without compromising on quality and services.

It operates scheduled domestic and international flights and it is besides the first air hose in the part to implement to the full ticketless travel and unassigned seats. On 12 November 2008, Air Asia abolished fuel surcharges. In making so, it claimed to be the ‘first air hose in the universe to get rid of fuel surcharges ‘ . From this statement, we can reason that Air Asia is successful to spread out their market every bit good as they air hose had flown 55 million cumulative riders by 2009.

In 2010, it has the universe ‘s lowest costs for an Airline, at $ 3.21 per seat-kilometer. Air Asia is able to pull more clients in future since they can offer lower monetary value tickets to flight around the universe.

Last but non least, Air Asia is a corporate that possible to growing among the LCC industry due to its competency scheme keeping. This corporate was emphasize on leanest cost construction ; transparence in determination devising and information sharing ; safety ; invest and heighten the Air Asia trade name to maximise shareholder`s value ; human capital development ; and passion for guest satisfaction. Hence, investor can be assurance with their public presentation as good.

3.0 Company Analysis

AirAsia is one of the award winning and largest low menu air hoses in the Asia spread outing quickly since 2001. With a fleet of 72 aircrafts, AirAsia flies to over 61 domestic and international finishs with 108 paths, and operates over 400 flights daily from hubs located in Malaysia, Thailand, and Indonesia. Today, AirAsia has flown over 55 million invitees across the part and continues to make more extended path web through its associate companies. AirAsia believes in the no-frills, hassle-free, low menu concern construct and feels that maintaining costs low requires high efficiency in every portion of the concern. Through the corporate doctrine of “Now Everyone Can Fly” , AirAsia has sparked a revolution in air travel with more and more people around the part taking AirAsia as their preferable pick of conveyance. AirAsia creates values through the undermentioned vision and mission.

( Resources: hypertext transfer protocol: // )

3.1 Mission

• To be the best company to work for whereby employees are treated as portion of a large household

• Create a globally recognized ASEAN trade name

• To achieve the lowest cost so that everyone can wing with AirAsia

• Maintain the highest quality merchandise, encompassing engineering to cut down cost and enhance service degrees

3.2 Vision

To go on to be the lowest cost short-haul air hose in every market we serve, presenting strong organic growing through offering the lowest airfares at a net income.

Leanest Cost Structure

• Efficient and simple point to indicate operations
• Attracting and retaining hardworking and smart people
• Passion for uninterrupted cost decrease

Maximise Shareholders ‘ Value

• Resilient net income growing through our lower cost base
• Expansion of the AirAsia web in a prudent and disciplined mode
• Invest and heighten the AirAsia trade name to increase investors ‘ returns

• Comply with the highest International Aviation Safety Standards and patterns
• Keep operations simple and transparent
• Ensure the security of our Peoples and Guests

Passion for Guests ‘ Satisfaction

• Maintain simpleness in every application
• Practice the unique and friendly AirAsia experience at every chance
• Recognise the linkage between invitees ‘ satisfaction and long-run success

• Transparency in decision-making and information sharing
• Optimum revelation – higher than industry norms
• Timeliness in unwraping information

Human Capital Development

• Invest in both difficult and soft accomplishments
• Recognize all our Peoples as subscribers to our success
• Reward excellence and single parts
• Keeping one trade name across the Group

( Resources: hypertext transfer protocol: // )

3.3 Scheme

( Resources: hypertext transfer protocol: // )

3.4 Valuess


Adopting a zero tolerance to insecure patterns and strive for nothing accidents through proper preparation, work patterns, hazard direction and attachment to safety ordinances at all times.

2. Valuing Our Peoples

Perpetrating to our people ‘s development and wellbeing and handling them with regard, self-respect and equity.

3.Customer Focused

We care and treat everyone in the same mode that we want to be treated.


Practicing highest criterions of ethical behavior and demonstrate honestness in all our lines of work in order to command trust and common regard.

5.Excellence in Performance

Puting ends beyond the best and reenforcing high quality public presentation criterions and accomplishing excellence through implementing best patterns.

( Resources: Air Asia Annual Report 2008 )

3.5 Logo

3.6 Motto


3.7 Directors Biography

Dato ‘ Abdel Aziz @ Abdul Aziz bin Abu Bakar ( Non-Executive Chairman )

Dato ‘ Sri Anthony Francis Fernandes ( normally known as Dato ‘ Sri Tony Fernandes )

Dato ‘ Kamarudin bin Meranun ( Deputy Group Chief Executive Officer )

Conor Mc Carthy ( Non-Executive Director )

3.8 Independent Directors

Dato ‘ Leong Sonny @ Leong Khee Seong ( Independent Non-Executive Director )

Fam Lee Ee ( Independent Non-Executive Director )

Dato ‘ Mohamed Khadar bin Merican ( Independent Non-Executive Director )

Datuk Alias bin Ali ( Independent Non-Executive Director )

( Resources: hypertext transfer protocol: // )

Share Registrar

Symphony Share Registrars Sdn Bhd

Degree 26, Menara Multi-Purpose, Capital Square

8 Jalan Munshi Abdullah

50100 Kuala Lumpur, Malaysia

Tel: 603-2721 2222 Facsimile: 603-2721 2530/1

Corporate Agent

ECM Libra Berhad

Stock Exchange Listing

Main Board of Bursa Malaysia Securities Berhad

( Listed since 22 November 2004 )

( Stock codification: 5099 )



Degree 10, 1 Sentral, Jalan Travers, Kuala Lumpur Sentral

50706 Kuala Lumpur

Tel: 603-2173 1188 Facsimile: 603-2173 1288

Audit Committee

Dato ‘ Leong Sonny @ Leong Khee Seong

Fam Lee Ee

Datuk Alias bin Ali

Dato ‘ Mohamed Khadar bin Merican

( Resources: Air Asia Annual Report 2008 )

3.9 Major Stockholders

As of 12 November 2009, approximately 26 % of the entire portion capital was owned by TuneAir Sdn Bhd. AirAsia is a well proprietor managed company, the cumulative ownership by the board of managers constitutes about 28 % of the portion capital.

Stockholder name

No. of portions owned

% Share capital

Tune Air Sdn Bhd


25.95 %

Employees Provident Fund Board


11.36 %



6.01 %

Nomad Investment Partnership


5.02 %

Lembaga Tabung Haji


3.14 %



48.51 %



100.0 %

Last Updated:24 November 2009

( Resources: hypertext transfer protocol: // )

3.10 Ownership Structure

Harmonizing to the registry, the Group had as of 12 November 2009, a sum of about 21,969 shareholders.Distribution Table Harmonizing To The Number of Securities Held In Respect of Each Type of Security as of 12 November 2009.

Number of Shareholder

% of Stockholders

Number of Shares

% of Issued Share Capital

Less than 100





100 – 1,000





1,001 – 10,000





10,001 – 100,000





100,001 to less than 5 % of issued portions





5 % and above of issued portions










( Resources: hypertext transfer protocol: // )

3.11 Business Model

AirAsia follows the Low-Cost-Carrier ( LCC ) concern theoretical account in the air hose industry, which can be characterized as below:

Low Cost Carrier ( LCC ) Business Model

Simple Merchandise

• Catering on demand for excess payment

• Airplanes with narrow seating and merely a individual category

• No place assignment

• No frequent circular programmes


• Non-business riders, particularly leisure traffic and price-conscious concern riders

• Short-haul point to indicate traffic with high frequences

• Aggressive selling

• Secondary airdromes

• Competition with all conveyance bearers

Low Operating Costss

• Low rewards

• Low airdrome fees

• Low costs for care, cockpit preparation and standby crews due to homogenous fleet

• High resource productiveness

• Short land delaies due to simple embarkation procedures

• No air freight, no hub services, short cleansing times, and high per centum of online gross revenues

( Resources:

Professional Diploma Program in Logistics and Supply Chain Management

Undertaking Studies – Enabling Technology in Airline Industry


WONG Pui Man, Cary

March 2009 )

4.0 Investment Valuation Ratio

In this portion, we measure four types of investing rating ratios twelvemonth 2004 to 2008 for Air Asia. For the ground of non utilizing twelvemonth 2009, the one-year study of twelvemonth 2009 has non been audited.

1. Price/earnings ratio

Formula: Price/earnings ratio = Stock Price per ShareEarning per ShareEPS

Component: Price/earnings ratio = RM 0.87 ( RM495352000 ) /2374210000

= RM 0.87RM 0.21 = -4.14

The ringgit sum in the numerator is the adjusted shutting monetary value for AIRASIA BHD as of December 31, 2008 as reported in hypertext transfer protocol: // . In the denominator, the EPS figure is calculated by spliting the company ‘s reported net net incomes ( income statement in one-year study AA Corporate 2008, from hypertext transfer protocol: // ) by the leaden mean figure of common portions outstanding ( income statement in one-year study AA Corporate 2008 ) to obtain the ( RM 0.21 ) EPS figure. This sum of RM0.21 is a net loss per portion.

Using same stairss, the Price/earnings ratio for twelvemonth 2004-2008 are calculated as below:






Price/Earnings Ratio






Air Asia stock has high P/E ratios in twelvemonth 2004 to 2007. This indicates investors were anticipating higher net incomes growing in the hereafter compared to the overall market, as investors are paying more for today ‘s net incomes in expectancy of future net incomes growing. However, due to weak public presentation in twelvemonth 2008, the P/E ratio appeared to be negative value. As each industry has much different growing chances, it ‘s usuallymore utile to compare the P/E ratios of onecompany to other companies in the same industry.

2. Price/cash flow ratio

Formula: Price/cash flow ratio = Stock Price per ShareOperating Cash Flow per Share

Component: Price/cash flow ratio = RM 0.87 ( RM 411293000 ) /2374210000

= RM 0.87 ( RM 0.17 ) = -5.12

The ringgit sum in the numerator is the adjusted shutting stock monetary value for AIRASIA BHD as of December 31, 2008 as reported in hypertext transfer protocol: // . In the denominator, the hard currency flow per portion is calculated by spliting the reported net hard currency provided by operating activities ( hard currency flow statement in one-year study AA Corporate 2008 ) by the leaden mean figure of common portions outstanding ( income statement in one-year study AA Corporate 2008, from hypertext transfer protocol: // ) to obtain the ( RM 0.17 ) hard currency flow per portion figure. This hard currency flow is in a province of escape.

Using same stairss, the Price/cash flow ratio for twelvemonth 2004-2008 are calculated as below:






Price/Cash Flow Ratio






The price/cash flow ratio is non a better investing rating index than the P/E ratio for Air Asia since the magnitude of alteration of ratio is excessively big in twelvemonth 2004 to 2008. Air Asia ‘s hard currency flow from operating in 2008 is a negative sum. Actually this figure is after bear downing the unwinding loss on derived functions. To acquire a more accurate image on Air Asia ‘ existent public presentation, we should except it from analysis because this immense hard currency flow of unwinding procedure is non needfully to be repeating. We should take into history for company ‘s ability in serving its debt before reach decision with the public presentation of Air Asia in twelvemonth 2008 regarding to the negative P/CF ratio.

3. Price/book value ratio

Formula: Price/book value ratio = Stock Price per ShareShareholders’Equity per Share

Component: Price/book value ratio = RM 0.87RM 1615478000/2374210000

= RM 0.87RM 0.68 = 1.28

The ringgit sum in the numerator, RM 0.87, is the adjusted shutting stock monetary value for AIRASIA BHD as of December 31, 2008, as reported in hypertext transfer protocol: // . In the denominator, the book value per portion is calculated by spliting the reported stockholders ‘ equity ( balance sheet in one-year study AA Corporate 2008 ) by the leaden mean figure of common portions outstanding ( balance sheet in one-year study AA Corporate 2008, from hypertext transfer protocol: // ) to obtain RM 0.68 book value per portion figure.

Using same stairss, the Price/book value ratio for twelvemonth 2004-2008 are calculated as below:






Price/Book Value Ratio






On norm, the price/book value ratio was being high in this period. This is because of the stock besides holding high price/sales ratios in this period. This means the stock is selling at higher than book value so the potency for future growing may already be factored into the overpriced portions of the stock. The overpriced stock gives some thoughts of investors are paying excessively much for what would be left if the company went belly-up instantly.

4. Price/sales ratio

Formula: Price/sales ratio = Stock Price per ShareNet SalesRevenueper Share

Component: Price/sales ratio = RM 0.87RM 2635977000/2374210000

= RM 0.87RM 1.11 = 0.78

The ringgit sum in the numerator is the adjusted shutting stock monetary value for AIRASIA BHD as of December 31, 2008, as reported in hypertext transfer protocol: // . In the denominator, the gross revenues per portion figure is calculated by spliting entire gross ( income statement in one-year study AA Corporate 2008 ) by the leaden mean figure of common portions outstanding ( income statement in one-year study AA Corporate 2008, from hypertext transfer protocol: // ) to obtain the RM 1.11 gross revenues per portion figure.

Using same stairss, the Price/sales ratio for twelvemonth 2004-2008 are calculated as below:






Price/Sales Ratio






The high price/sales ratios which are greater than 0.75 indicate the stock is excessively expensive in these five old ages except in twelvemonth 2006. This means fundamentally that investors are paying a premium on the future growing of the company. All things being equal, a low price-to-sales ratio is good intelligence for investors, and a really high price-to-sales ratio can be a warning mark. As a decision, Air Asia ‘s growing has become overvalued in this period.

Mention: hypertext transfer protocol: //

hypertext transfer protocol: //

5.0 Analysis of Historical Data

5.1 Capital Asset Pricing Model

To execute the cardinal analysis, we used hebdomadal shutting monetary values of stock and KLSE market index for period of 5 old ages with 1 twelvemonth interval. Therefore, we develop Capital Asset Pricing Model ( CAPM ) from 2005 to 2009 based on the historical informations. We get the AirAsia historical stock monetary value informations from hypertext transfer protocol: // s=5099.KL and Malayan 3 month treasury-bill price reduction rate from hypertext transfer protocol: // Capital Asset Pricing Model that we developed from twelvemonth 2005 to twelvemonth 2009 is shown in Table 1, Table2, Table3, Table 4 and Table5 at the appendix subdivision. From the CAPM that was developed, we used it to compare with the hebdomadal market monetary value on 1 March 2010. We summarized it in the tabular array below.



Market Return on 1 March 2010

Undervalued/Overvalued/Correctly Priced




-0.9265 %

0.3026 %


1.2291 %

Buy/ Hold


1.4612 %

0.3026 %


-1.1586 %



-0.0244 %

0.3026 %


0.3270 %

Buy/ Hold


0.8591 %

0.3026 %


-0.5565 %



0.0053 %

0.3026 %


0.2973 %

Buy/ Hold

Capital Asset Pricing Model ( CAPM ) is a theoretical account that relates the needed rate of return for a security to its hazard as measured by beta ( Bodie, Kane, Marcus, 2008 ) . As shown above, we used five old ages of CAPM to compared with the market return on 1 March 2010. In 2005, 2007 and 2009, it shows that the market return on 1 March 2010 is greater than CAPM on that twelvemonth or it can besides be said that the market return on 1 March 2010 lies above security market line ( SML ) for that twelvemonth. Therefore, we can said that the market monetary value on 1 March 2010 is undervalued or good to purchase when compared to CAPM on twelvemonth 2005, 2007 and 2009. The market return on 1March 2010 is lower than CAPM of 2006 and 2008 or it lies below the SML for that twelvemonth. Therefore, we can said that the market monetary value on 1 March 2010 is overvalued or good to sell when compared to CAPM of 2006 and 2008.

Alpha is the unnatural rate of return on a security in surplus of what would be predicted by Capital Asset Pricing Model ( Bodie, Kane, Marcus, 2008 ) . Based on above tabular array, positive alpha is perceived a stock is undervalued or good to purchase. For the negative alpha, it perceived a stock is overvalued or good to sell.

5.2 Index Model

Index theoretical account is a theoretical account of stock returns utilizing a market index to stand for systematic hazard factors ( Bodie, Kane, Marcus, 2008 ) . In our analysis, we used KLSE index as market index. Based on the historical informations shown in Table 1, Table 2, Table 3, Table 4 and Table 5, we estimate the index theoretical account for AirAsia from twelvemonth 2005 to 2009.

In 2005, the security characteristic line is:

Stock Excess Return=0.0089+1.4262 ( Stock Market Return )

R-square shows that 25.09 % of fluctuation in AirAsia ‘s stock extra return is explained by fluctuation in market extra return. Hence the 74.91 % of fluctuation is residuary discrepancy or house specific hazard.

In 2006, the security characteristic line is:

Stock Excess Return=-0.0003+1.0908 ( Stock Market Return )

R-square shows that 9.81 % of fluctuation in AirAsia ‘s stock extra return is explained by fluctuation in market extra return. Hence the 90.19 % of fluctuation is residuary discrepancy or house specific hazard.

In 2007, the security characteristic line is:

Stock Excess Return=0.0008+1.1376 ( Stock Market Return )

R-square shows that 34.26 % of fluctuation in AirAsia ‘s stock extra return is explained by fluctuation in market extra return. Hence the 65.74 % of fluctuation is residuary discrepancy or house specific hazard.

In 2008, the security characteristic line is:

Stock Excess Return=-0.0136+0.5036 ( Stock Market Return )

R-square shows that 7.82 % of fluctuation in AirAsia ‘s extra return is explained by fluctuation in market extra return. Hence the 92.18 % of fluctuation is residuary discrepancy or house specific hazard.

In 2009, the security characteristic line is:

Stock Excess Return=0.0037+1.156 ( Stock Market Return )

R-square shows that 21.79 % of fluctuation in AirAsia ‘s stock extra return is explained by fluctuation in market extra return. Hence the 78.21 % of fluctuation is residuary discrepancy or firm-specific hazard.



Beta or Slope

Residual Variance or 1-R-square ( % )





















Overall, the beta or the incline coefficients of above theoretical account are positive. Beta is the sensitiveness of a security ‘s returns to the market factor ( Bodie, Kane, Marcus, 2008 ) . The positive beta shows that AirAsia ‘s stock move in same way as the market from 2005 to 2009. It means that the stock extra return addition with the market extra return and frailty versa. However, 2005 has a larger beta and this shows that it carries more market hazard than other old ages ; 2008 has lower beta which means that 2008 carries less market hazard than other old ages. From above theoretical account, 2005, 2007 and 2009 have positive intercept and 2006 and 2008 have negative intercept. Intercept is the expected return when the market is impersonal ( Bodie, Kane, Marcus, 2008 ) . However, positive value is preferred. Besides that, the R-square shows that 2007 have lower house particular hazard and 2008 have higher firm-specific hazard within this five old ages. Entire hazard is sum of market hazard and house particular hazard. Based on table above, it is hard to place which twelvemonth have the highest or lowest entire hazard.

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