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Malaysian Airports Holdings Berhad (MAHB) has announced that it will be raisinginternational passenger service charges (PSC) effective 15 November 2011. Meanwhile,aircraft landing and parking charges will be increased in 3 stages effective January 2012,January 2013 and January 2014.

PSC for international flights at the LCCT will increase to RM32/pax from RM25/paxpreviously (+28%), while charges at the main terminal will increase to RM65/pax from

RM51/pax (+27%).

Aircraft landing charge will be increased by 9% per annum in 3 stages over the next 3 yearswhile parking charges will be increased by 18%. This will also be done in three stages i.e.from Jan 2012, Jan 2013 and Jan 2014.

We believe at the current level of pricing, demand from AAs passengers is inelasticenough to absorb a RM7/pax increase in PSC (which represents just a minor 4% increaseto AAs FY12F average fare of RM194/pax).

This is judging by sustained double-digit demand growth despite AAs fuel surcharge re-instatement in May, which raised average fares by some 13%. Meanwhile, our forecast

already factors in a 2% per annum increase in user station charges per sector over the next3 years. We estimate that every further RM200/sector increase in user station charges willimpact bottomline by 2.6%.

The increase in charges announced by MAHB will have little negative impact to ourprojections. Furthermore, the potential of increased LCC terminals in the country going

forward could lower AAs cost substantially when these come on-stream. This follows AAsenhanced bargaining leverage with Khazanah now on its board.

Furthermore, we understand that MAHB will continue its incentive scheme which providesfree landing for three years for all new routes and additional frequencies by airlines.

We maintain our BUY rating on AA with an unchanged sum-of-parts derived fair value ofRM5.00/share. Key catalysts within the next 12 months: (1) Listing of Thai and Indo

associates in 4Q11-1Q12; (2) Launch of AAJ in 1Q12; (3) Exit of FY by Dec 2011; (4)

Improving results driven by yield and ancillary income upward trend.

AIRLINES

AIRASIA(AIRA MK, AIRA.KL) 28 October 2011

Sufficient room to absorb charges

Company report BUYAmResearch Sdn Bhd

www.amesecurities.com.my

+603 2036 2280

Price: RM3.93

Fair Value: RM5.00Rationale for report : Company Update

PP 12246/05/2012(030095)

YE to Dec FY10 FY11F FY12F FY13F

Core EPS (Sen) 27.9 32.1 34.4 41.8

PE (X) 14.1 12.2 11.4 9.4

Source : AmResearch

Published by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group)15th F loor Bangunan AmBank Group55 Jalan Raja Chulan50200 Kuala LumpurTel : (03)2070- 2444 ( research)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

Printed by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group)15th F loor Bangunan AmBank Group55 Jalan Raja Chulan50200 Kuala LumpurTel : (03)2070- 2444 ( research)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in thisreport may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or asolicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to time have a position in or withthe securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company andaffiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources thatwe believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair andreasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted forany loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of thisdate and are subject to change without notice.

For AmResearch Sdn Bhd

Benny ChewManaging Director

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AirAsia 28 October 2011

AmResearch Sdn Bhd 2

TABLE 1 :VALUATION MATRIX

YE to Dec FY09 FY10 FY11F FY12F FY13F

Revenue (RMmil) 3,132.9 3,992.7 4,896.2 5,373.6 6,361.0

Core net profit (RMmil) 447.5 795.9 914.8 1,018.3 1,236.1

EPS (Sen) 18.8 27.9 32.1 34.4 41.8

EPS growth (%) 164.9 48.2 14.9 7.1 21.4

Consensus EPS (Sen) n/a n/a n/a n/a n/a

DPS (Sen) 0.0 0.0 0.0 0.0 0.0

PE (x) 20.9 14.1 12.2 11.4 9.4

EV/EBITDA (x) 12.1 11.3 9.7 10.1 8.6

Div yield (%) 0.0 0.0 0.0 0.0 0.0

ROE (%) 23.1 24.6 21.7 19.6 19.6

Net Gearing (%) 71.7 68.2 60.8 62.2 59.3

Source : Company, AmResearch estimates