27 August 2007

How big is the brand "AirAsia"?

Some people around me always travel in flight due to their job. Hence, I'd heard a lots from them about AirAsia and MAS. And from their mouth, I know the conditions of the services and performances of these airlines.

Here are my observations on the growth in AirAsia during these years:

One or two years ago, people still don’t like AirAsia. They choose AirAsia just because it is cheap. People has a lots of complains like:

  • Attitude of its staff were bad.
  • The food on flight is not good enough.
  • It doesn’t assign seat numbers for passengers.
  • Boarding onto AirAsia’s flight is a bit mess up, just like getting on a bus.
  • Delays and cancellations are common.
  • Some rumors said that AirAsia sometimes combined the passengers of two flights into one.
  • Actually, most of these negative impressions arise from people’s over-expectation on AirAsia to meet the same standard as other airlines, because most people that took AirAsia didn’t have any experience with other LCC. They can only compare AirAsia to their previous experience with normal airline, especially MAS. We all know that, MAS is famous (worldwide) for its good service and excellent attitude. (always, I heard that MAS flight attendances are all quite beautiful too). In fact, MAS wins the Skytrax's Best Cabin Staff Award for many years. So, the quality of AirAsia’s services is just too bad as compared to MAS.

    while AirAsia is keep improving, people now gradually get used to AirAsia’s no-frill style – no ticket, no assigned seat, no free meal, etc.

    An important improvement of AirAsia is the reduction of delayed flight. AirAsia’s on time performance for the past six months is about 85%. Some of my friends now prefer AirAsia than MAS, even when they are on an official trip (means they don’t have to pay for the air tickets, their employers will pay for them), simply because they are fed up with the (infamous) flight-delays of MAS.

    Another reason they prefer AirAsia is that AirAsia makes their schedules more flexible, because it has a higher flight frequency than MAS. They have more choice for the departure time.

    So now, the name “AirAsia” means a lots.

    1. It means “cheap”. This is the most sucessful brand image for AirAsia. When I fly, I definitely choose AirAsia; because I know that with AirAsia I'm having the lowest fare.
    2. It also means “less delay”, as compared to MAS.
    3. It means “more choice” for departure time, due to its high flight frequency.
    AirAsia today has gradually become an airline that people prefer to fly with, not only due to the economic consideration. That’s what we call “the power of brand”.

    Besides my own observations, there are some supporting points that AirAsia is a great brand:

    1. In the new released World Airline Awards® year 2007, AirAsia ranks no.1 in Asia region for the Best Low-cost Airline Award. (The Skytrax’s World Airline Awards® are recognized around the world, and renowned for being the only truly global, Independent passenger survey of airline standards.)
    2. Recently, a new AirAsia Credit Card was launched. The issuer of this new AirAsia’s card is Citibank. As we know, Citibank is the top-brand in credit card service. Citibank is now partnered with AirAsia...... I think this means something.
    3. Couple of weeks ago, the Virgin’s Group announced that it’ll take up 20% in FAX. There are total five airlines under Virgin Group, each of them carry the word "Virgin" in their name, e.g. Virgin Atlantic, Virgin America, etc. But this time, instead of using its “Virgin” brand, FAX is renamed to "AirAsia X" to start its long-haul LCC business. As Tony said, “AirAsia brand is very big, bigger than Virgin out here.”

    21 August 2007

    Reasons of buying AirAsia

    In value-investment, you must be able to list downs the attractive features of a company that you're investing in. If your text can't cover for (at least) half page of a paper, it's probably that you're not quite understand this company, and this investment can't be considered a secure one.

    So, I decided to list down all the reasons for every company that I buy. I start with AirAsia, because this is my latest investment. I'm still quite excited that I found this company for investment.

    I invest in AirAsia, because it's a great company, due to the following reasons:-

    1. Simple business model that I can understand.
    2. A growing company in a growing industry.
    3. Great management – Tony Fernandes
    4. High profitability – It has a high profit margin compared to the other LCCs.
    5. Leader in the industry – Best Low-cost Airline Award (rank no.1 in Asia region), year 2007 .
    6. Strong Brand Name - high value of intangible asset.
    Above reasons show how good is the AirAsia. I'll elaborate these points one by one in the following comments.

    But, no matter how good is a company, it's not a good investment if the price is high. I have to make sure that I'm not paying too much for it. Here's my own analysis based on its 3Q-2007 report:

    • AirAsia's stock price is around RM1.80 today. 9-month profit for FYE2007 is about RM0.13 per share. this means its PER for 2007 is about 10 to 12.
    • its 9-month revenue grow 53%, and the 9-month profit before tax grow 190% as compare to 2006.
    • based on its growth in fleet size from 50 aircrafts (this year) to about 150 (year 2013), my estimation for its average growing rate in the next five years is about 25% per annum.
    • The ratio of PE to its growth rate is less than 0.5, so the price may be considered cheap. (This is an analysis technic suggested by Peter Lynch).
    • its net asset per share is just 64sen. This is less comfortable for a secure investment. But AirAsia has a great value of intangible asset - its brand name.

    As a conclusion, I'll continue to accumulate AirAsia stock as long as its price is still below RM2.00.

    And I hope that my holding period for this stock is...... forever.


    [updated 3/11/2008]: Months after holding AirAsia, I had found several accounting pitfalls in the statements of AirAsia. In short, AirAsia's performance is not as good as I thought before (i.e. when I wrote this post). For more details, pls refer to my other posts tagged "airasia".


    14 August 2007

    Discover the low-cost-carrier - AirAsia

    The first time I heard about AirAsia, is from friends around me.

    People start talking about AirAsia.
    “AirAsia’s ticket is very cheap”,
    “It’s a new airline, you can fly with only RM9.99”
    “now flying to Penang is cheaper than driving”

    wow, this company is really cool....
    I love Airasia, because she makes “every one can fly”.
    and She makes me able to fly.

    Before the existence of AirAsia, I never fly. The air tickets are just too expensive. Being attracted by its “One Million Free Tickets” promotion and the low prices, I had been flying with AirAsia more than ten times during past twelve months. And because of AirAsia, I and my wife can have our honey-moon in Bali.

    Thanks to AirAsia.

    When flying with AirAsia, I found that it is almost full-loaded in every flight, especially during weekends. When the price is cheap, just about every one likes to take a flight.

    So, some voices come into my mind,
    “I like this company, she really makes every one fly”
    this company must be making plenty of $$$$$
    “Buy its share!”

    A lots of people don’t believe in the business model of AirAsia.
    “the air tickets are so…… cheap…..!!!!”
    “how can it make profit out of that….???”
    “the low price is just temporarily, it will raise the price later, or it may not survive”
    “how long can it last before going to bankrupt?”

    But for me, I believe in the magic of Wal-Mart:
    The lower is your price, the more money you make.
    And I really love the phrase sound: “the more you help people to save their money, the more $$$$ you get from them

    Wow, this is the greatest idea in the world. The feeling of “earning money while helping people to save money” is just like “getting rich while doing charity”. Sounds cool……

    And, you know, AirAsia is doing the same thing as Wal-Mart. So, I decided study this company.

    10 August 2007

    Start a blog of Investment

    quite some time ago, i'm thinking to have my own blog about investment. and it remained as an idea in my brain for about a year. Today, 10-Aug-2007, I'm very happy, that i finally put it into action, and start this blog. why i want to start this blog:

    • I'd like to have an investment diary, to record my ideas of investment and the reasons when I make a decission.
    • I hope that this blog can serve as a track record for my investment activities, so that i can review my performance in the future, looking back on the right decissions i've done, and, more important, the mistakes that i've made.
    • I hope that i can list down the principles of my investment strategy, and to share my thoughts to anybody that loves value-investing.
    • most important reason: i hope this blog will record my succesful investment result, serving as evidence that value investment is one of the highest return investment strategy in long-run. It has been proved in US by Warren Buffet, and now, i want to proof that value-investment works best in Malaysia too. (in short, to 'show off' how best is my performance of investment, haha....)

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