1H15 Results Inline. Results Note. Price: RM1.01 Target Price: RM1.86. PP7004/02/2013(031762) Page 1 of August 2015

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1 AirAsia Berhad 1H15 Results Inline By Adrian Ng l adrian.ng@kenanga.com.my Period 2Q15/1H15. Actual vs. Expectations AIRASIA s 1H15 core net profit of RM262m accounts for 41% both our and consensus fullyear estimates. We deem the results as inline as we are expecting a stronger 2H15 backed by a seasonally stronger quarter in 4Q15. OUTPERFORM Price: RM1.01 Target Price: RM1.86 Share Price Performance Dividends No dividend declared in 2Q15, as expected. Key Results Highlights YoY, AIRASIA s 1H15 core net profit saw a major improvement by 72% to RM262m despite a flattish revenue of RM2,622m. This is mainly due to the improvements in operating margins driven by lower fuel costs that came down by 14%, coupled with better contribution from its associates (+569%) i.e. TAA, AAE Travel. That aside, average fare and ancillary per pax also seen minor improvements by 1% to RM133.1/pax and RM42.6/pax, respectively. QoQ, its 2Q15 revenue improved by 2% to RM1,325m, but its core net profit declined by 28% to RM109m. The decline in profitability was mainly driven by several factors, i.e. spike in staff costs (+12%) due to late bonus payments, higher financing costs (+7%) and also a lower contribution from its associates (-65%). On a positive note, its average fare per pax has seen an improvement of 4% to RM135.5/pax, while its passenger load factor remains healthy at 80% (+5ppt) as a result of better capacity management. Outlook Moving forward, we believe that should the yields be maintained at current levels, AIRASIA will continue to benefit from lower jet fuel costs. That aside, management highlighted in its teleconference that they are highly confident in turning around its Indonesian (IAA) and Philippines (PAA) associates by year-end. Their plan of raising funds of c.usd200m for both IAA and PAA through convertible bond and equity injection is still on-track and management is targeting to complete the exercise by year-end. Change to Forecasts Rating No change in our earnings estimates. Maintain OUTPERFORM KLCI 1, YTD KLCI chg -10.4% YTD stock price chg -62.9% Stock Information Bloomberg Ticker AIRA MK Equity Market Cap (RM m) 2,810.8 Issued shares 2, week range (H) week range (L) mth avg daily vol: 24,460,780 Free Float 62% Beta 1.0 Major Shareholders TUNE AIR SDN BHD 19.0% WELLINGTON MANAGEMEN 11.5% EMPLOYEES PROVIDENT 7.4% Summary Earnings Table FYE Dec (RM m) 2014A 2015E 2016E Turnover 5,416 5,573 5,728 EBIT 754 1,094 1,240 PBT Net Profit (NP) Core NP Consensus (CNP) n.a Earnings Revision n.a. n.a. n.a. EPS (sen) EPS growth (%) -77% 1017% -17% NDPS (sen) BV/Share (RM) PER (x) Price/BV (x) Net Gearing (x) Dividend Yield (%) Valuation We are reiterating our OUTPERFORM call on AIRASIA with a lower Target Price of RM1.86 based on 1.32x FY15E PBV, after factoring in the potential impairment of RM1.6b in our Scenario 2 analysis report dated 19 th June 15. Risks to Our Call Sharp decline in airfares on intensified price war. Sharp fluctuation in currency and fuel price. War, global political risk, pandemic. PP7004/02/2013(031762) Page 1 of 5

2 Result Highlight FYE Dec (RM'm) 2Q15 1Q15 QoQ 2Q14 YoY 1H15 1H14 YoY Turnover 1, , % % 2, , % EBITDA % % % Depreciation % % % EBIT % % % Interest inc/(exp) % % % Associates % % % Exceptional items % % % Forex gain/(loss) % % % Pretax profit % % % Taxation % % % Deferred tax % % % Profit after tax % % % Minority interest n.m. 0.0 n.m n.m. PATAMI % % % Core PATAMI % % % EPS (sen) Core EPS(sen) BV/share (RM) Net gearing (x) EBITDA margin 30% 33% 22% 31% 25% EBIT margin 17% 18% 11% 18% 13% Pretax margin 4% 15% 19% 9% 15% Effective tax rate 30% 4% 1% 9% 2% Source: Company, Kenanga Research Operational Analysis Revenue (RM m) 2Q15 1Q15 QoQ Chg 2Q14 YoY Chg 1H15 1H14 YoY Chg Seat revenue % % 1, , % Ancillary income % % % Other operating income % % % Total 1, , % 1, % 2, , % Performance Indicators ASK (m) 9, , % 8, % 18, , % RPK (m) 7, , % 6, % 14, , % Passenger load factor (%) 80% 75% % % 80% -2.7 Passengers carried ('000) 5,952 5,539 7% 5,573 7% 11,491 10,946 5% Yield (sen/rpk) % % % RASK (sen) % % % Average fare (RM) % % % Ancillary per pax % % % Operating cost (RMm) Fuel cost % % , % Staff cost % % % Maintenance, overhaul & user fees % % % Aircraft related cost % % % Depreciation % % % Others % % % Total 1, , % 1, % 2, , % CASK % % % CASK - Ex-Fuel % 7.3 3% % Source: Company, Kenanga Research PP7004/02/2013(031762) Page 2 of 5

3 Income Statement Financial Data & Ratios FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E Revenue 4,946 5,189 5,416 5,573 5,728 Growth (%) EBITDA 1,596 1,600 1,535 1,823 1,977 Revenue 5% 4% 3% 3% Depreciation EBITDA 0% -4% 19% 8% Operating Profit 1, ,094 1,240 EBIT -6% -22% 45% 13% Interest Exp Pre-tax Income -82% -94% 4074% -17% PBT 2, Net Income -31% -39% 82% 19% Taxation Minority Interest Profitability (%) Net Profit 1, EBITDA Margin 32% 31% 28% 33% 35% Core Net Profit EBIT Margin 21% 19% 14% 20% 22% PBT Margin 41% 7% 0% 17% 14% Net Margin 37% 7% 2% 17% 13% Effective Tax Rate 9% 0% -295% 3% 3% ROE 17% 12% 8% 12% 13% Balance Sheet ROA 17% 12% 8% 12% 13% FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E Fixed Assets 11,746 13,880 18,134 18,289 18,446 DuPont Analysis Intangible Assets Net margin (%) 37% 7% 2% 17% 13% Inventories Leverage Factor (x) Receivables 1,357 1, ROE (%) 17% 12% 8% 12% 13% Cash 2,233 1,385 1,338 1,997 2,481 Total Assets 15,703 17,181 20,443 21,301 21,985 Leverage Payables ,009 1,009 1,009 Debt/Asset (x) ST Borrowings 1,126 1,081 2,275 2,275 2,275 Debt/Equity (x) Other ST Liability 1,295 1, Net Debt/(Cash) 6,177 8,785 11,390 10,731 10,247 LT Borrowings 7,283 9,089 10,453 10,453 10,453 Net Debt/Equity (x) Other LT Liability ,548 1,548 1,548 Minorities Int Valuations Net Assets 4,860 5,006 4,557 5,383 6,036 EPS (sen) Core EPS (sen) Share Capital 1,506 1,507 1,509 1,509 1,509 NDPS (sen) Reserves 3,354 3,499 3,048 3,874 4,527 BVPS (RM) Equity 4,860 5,006 4,557 5,383 6,036 PER (x) Core PER (x) N. Div. Yield (%) PBV (x) Cashflow Statement EV/EBITDA FY Dec (RM m) 2012A 2013A 2014A 2015E 2016E Operating CF 1,355 1,428 2,318 1,834 2,002 Investing CF -2,134-4, Financing CF 1,533 3, Change In Cash ,423 1,108 1,222 Free CF ,054 1,702 1,864 Source: Kenanga Research Fwd Core PER Band Fwd PBV Band Source: Bloomberg, Kenanga Research PP7004/02/2013(031762) Page 3 of 5

4 Peer Comparison Name Local Currency Price Mkt Cap PER (x) Est. NDiv. Yld. 20-Aug- 15 Historical ROE P/BV Net Profit ('m) FY15/16 NP Growth (USD'm) FY14/15 FY15/16 FY16/17 (%) (%) (x) FY14/15 FY15/16 FY16/17 (%) (%) COMPANIES UNDER COVERAGE AIRASIA BHD MYR % 12% % 19% 1.86 Outperform MALAYSIA AIRPORTS HLDGS MYR , % 0% % 97% 5.90 Underperform CONSENSUS NUMBERS Low-Cost Carriers: ASIA AVIATION PCL THB % 8% , ,967.9 n.m. 14% 5.86 Buy AIRASIA X BHD MYR % -17% % -122% 0.23 Hold TIGER AIRWAYS HOLDINGS SGD % -33% % -147% 0.30 Hold CEBU AIR INC PHP , % 22% , ,704.0 n.m. 31% Buy RYANAIR HOLDINGS PLC EUR , % 24% , % 17% Buy EASYJET PLC GBP 1, , % 21% % 10% 1, Buy SOUTHWEST AIRLINES CO USD , % 27% 3.1 1, , , % 2% Buy JETBLUE AIRWAYS CORP USD , n.a. 21% % 12% Buy GOL LINHAS AEREAS INTEL USD % n.a , % -68% 2.86 Hold VIRGIN AUSTRALIA HOLDINGS AUD , % -4% % -331% 0.50 Hold Full-Service Carriers: AIR CHINA LTD-H HKD , % 13% 1.3 3, , , % 10% 9.34 Buy SINGAPORE AIRLINES LTD SGD , % 3% % 92% Hold JAPAN AIRLINES CO LTD JPY 4, , % 1851% , , , % 13% 5, Buy ANA HOLDINGS INC JPY , % 5309% , , , % 52% Hold CATHAY PACIFIC AIRWAYS HKD , % 12% 1.0 3, , , % 13% Hold CHINA EASTERN AIRLINES HKD , % 17% 1.5 3, , , % 11% 6.71 Buy CHINA SOUTHERN AIRLINES HKD , % 15% 1.4 1, , , % 13% 7.37 Hold HAINAN AIRLINES CO-A CNY , n.a. n.a. n.a. n.a. n.a. 2,591.2 n.a. n.a. n.a. n.a. n.a. Hold QANTAS AIRWAYS LTD AUD , % 22% 2.4-2, , % 57% 4.51 Buy KOREAN AIR LINES CO LTD KRW 32, , % 0% , , , % n.m. 46, Buy THAI AIRWAYS INTERNATIONAL THB % -8% , , , % -219% Sell CHINA AIRLINES LTD TWD , % 14% , ,597.3 n.m. -8% Hold EVA AIRWAYS CORP TWD , % 18% 1.6-1, , ,365.6 n.m. -8% Buy GARUDA INDONESIA PERSERO IDR % 7% , ,238, % 41% Buy AIR NEW ZEALAND LTD NZD , % 19% % 32% 2.88 Buy VIRGIN AUSTRALIA HOLDINGS AUD , % -4% % -331% 0.50 Hold ASIANA AIRLINES KRW 5, % 10% , , , % 27% 8, Buy JET AIRWAYS INDIA LTD INR % 19% , , , % -124% Buy TRANSASIA AIRWAYS CORP TWD n.a. n.a. 7% n.a. 91% n.a. n.a. Sell Source: Kenanga Research FY16/17 NP Growth Target Price Rating PP7004/02/2013(031762) Page 4 of 5

5 Stock Ratings are defined as follows: Stock Recommendations OUTPERFORM : A particular stock s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). MARKET PERFORM : A particular stock s Expected Total Return is WITHIN the range of 3% to 10%. UNDERPERFORM : A particular stock s Expected Total Return is LESS than 3% (an approximation to the 12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate). Sector Recommendations*** OVERWEIGHT : A particular sector s Expected Total Return is MORE than 10% (an approximation to the 5-year annualised Total Return of FBMKLCI of 10.2%). NEUTRAL : A particular sector s Expected Total Return is WITHIN the range of 3% to 10%. UNDERWEIGHT : A particular sector s Expected Total Return is LESS than 3% (an approximation to the 12-month Fixed Deposit Rate of 3.15% as a proxy to Risk-Free Rate). ***Sector recommendations are defined based on market capitalisation weighted average expected total return for stocks under our coverage. This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may read this document. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees. Kenanga Investment Bank Berhad accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. Kenanga Investment Bank Berhad and its associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. Published and printed by: KENANGA INVESTMENT BANK BERHAD (15678-H) 8th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur, Malaysia Telephone: (603) Facsimile: (603) Website: Chan Ken Yew Head of Research PP7004/02/2013(031762) Page 5 of 5