70% B. Fundamental Analysis for AIRASIA BERHAD. Page 1 of 21. Fundamental Analysis: TRADING SERVICES Sub-Sector: Company Description:

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1 Page 1 of 21 Fundamental Analysis for AIRASIA BERHAD Fundamental Analysis: 70% B Company Name: AIRASIA BERHAD Board: Main Board Stock Code (Bursa): AIRASIA FBMKLCI: FALSE Bloomberg: AIRA:MK Reuters: AIRA.KL Industry: TRADING SERVICES Stock Grade: Investment Grade Sub-Sector: Company Description: AIRLINE / AIRPORT SVCES AND AVIATION EQPMT Since AirAsia introduced its low fare, no frills concept in December 2001, the airline now flies to over 48 destinations in Malaysia, Thailand, Indonesia, Macau, China, Date of Analysis: 28-Nov-11 Price: 3.62 Income Statement Analysis (2010): Year over year, AirAsia Bhd has been able to grow revenues from 3.1B to 3.9B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold, SGA expenses and income tax expenses. All of these improvements led to a bottom line growth from 506.3M to 1.1B. Balance Sheet Analysis (2010): Although debt as a percent of total capital decreased at AirAsia Bhd over the last fiscal year to 68.91%, it is still inline with the Airlines industry's norm. Additionally, there are enough liquid assets to satisfy current obligations. Accounts Receivable are among the industry's worst with 7.94 days worth of sales outstanding. This implies that revenues are not being collected in an efficient manner. Last, AirAsia Bhd is among the least efficient in its industry at managing inventories, with 3.32 days of its Cost of Goods Sold tied up in Inventories. Income Statement Analysis (Sep-11): Compared to the same quarter last year, AirAsia Bhd has seen their bottom line shrink from 327.3M to 152.3M despite an increase in revenues from 979.7M to 1.1B. An increase in the percentage of sales devoted to cost of goods sold from 51.91% to 63.03% was a key component in the falling bottom line in the face of rising revenues. Balance Sheet Analysis (Sep-11): This company's capital structure relies on a level of debt that is comparable to the Airlines industry's norm, at 67.09%, which represents a decrease from the prior fiscal year. Additionally, there are enough liquid assets to satisfy current obligations. Cash Collection is a strong suit as the company is more effective than most in the industry. As of the most recent quarter end, its uncollected receivables totaled 950.9M, which, at the current sales rate provides a Days Receivables Outstanding of However, the Days Receivables Outstanding has been increasing which shows that the company is extending suppliers more credit than it had in the past. Last,

2 Page 2 of 21 Shareholding Analysis: TUNE AIR SDN BHD is the major shareholder. EMPLOYEES PROVIDENT FUND BOARD is holding 6.14%.

3 Score Card - Fundamental Analysis Item W R S Remarks 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax increasing in the past 5 years Net Cash from Operations increasing in the past 5 years EPS increasing in the past 5 years 1.4. Growing/consistent in revenue and net profit in the last 5 quarters The current quarter's EPS is up more than 15% from the same quarter the year before EPS increasing in the past 5 quarters Sustainable Competitive Advantage & Strong Drivers 2.1. Strong brand, monopoly or barriers to entry Gross Profit Margin (> 40%) & Net Profit Margin (> 10%) 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next years 2.5. ROIC > 15% Strong future growth drivers Potential Risks Oil price increasing 3 - Conservative Debt 3.1. Long term debt < 4 times Net Profit This is due to business expansion Debt/Equity Ratio < Current Ratio > Healthy Cash Flow 4.1. Working capital increase slower than sales Short & declining "Cash Conversion Cycle" Free Cash Flow / Sales > 5% Management and Institutional Investors are Holding/Buying Stock 5.1. Management and Institutional Investors are Holding/Buying Stock Overall Score 70%

4 Market Timing Buy Criteria Criteria 1. The current quarter's EPS is up more than 15% from the same quarter the year before. 2. Price is below Intrinsic Value (20%) 3. Current EY% or Rolling 4Q EY% > 6% 4. Current DY% or Rolling 4Q DY% > 6% 5. Stock price breaks out of consolidation/dip on an uptrend. 6. Comparison of P/B ratio (for Financial stocks only) 7. Company owner, EPF, Khazanah and PNB heavily buying Applicable Remarks Sell Criteria Criteria 1. Current EY% or Rolling 4Q EY% < 6% for more than 2 years 2. Current DY% or Rolling 4Q DY% < 6% for more than 2 years 3. Quarterly EPS drop for 5 consecutive months 4. Fundamental of business turns unattractive or 5. bad Found a better opportunity to replace this stock 6. The stock drops near to my average cost. 7. Company owner, EPF, Khazanah and PNB heavily selling. Applicable Remarks

5 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax increasing in the past 5 years. 5,000,000 4,000,000 3,000,000 2,000,000 1,000, ,000, Total Revenue Net Income 1.2. Net Cash from Operations increasing in the past 5 years EPS increasing in the past 5 years Even if EPS growth is not trendy, but it is acceptable if 3-Y or 5-Y EPS growth rate is more than 15%

6 1.4. Growing/consistent in revenue and net profit in the last 5 quarters. 1,400,000 1,200,000 1,000, , , , ,000 0 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Turnover Net Profit 1.5. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: % 1.6. EPS increasing in the past 5 quarters Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 EPS

7 2 - Sustainable Competitive Advantage & Strong Drivers 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? NO 2. Does it have a strong leading brand? Very Strong 3. Does it have a high barriers to entry? High 4. Does it have market leadership? Very Strong 2.2. Gross Profit Margin (> 40%) & Net Profit Margin (> 10%) Gross Profit: Profit After Tax: 1,835,400 Sales Revenue: 3,948,095 1,061,411 Minority Interest: 0 Gross Profit Margin: 46% Net Profit Margin: 27% 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next 3-5 years LT Growth Rate: 21.14

8 2.5. ROIC > 15% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% % %

9 3 - Conservative Debt 3.1. Long term debt < 4 times Net Profit Long Term Debt: 6,637,400 Long Term Debt < 4 times Current Net Earnings (After Tax): Debt/Equity Ratio < 1 Debt/Equity Ratio: Current Ratio > 1 Current Ratio (MRQ): 1.56

10 4 - Healthy Cash Flow 4.1. Working capital increase slower than sales 100% 50% 0% -50% % -150% -200% Revenue Growth YOY Working Capital Growth YOY 4.2. Short & declining "Cash Conversion Cycle" Cash Conversion Cycle Free Cash Flow / Sales > 5% Free Cash Flow/Sales: -6.30%

11 Market Timing 1. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: % 2. Price is below Intrinsic Value (20%) Estimated IV: 3.7 to 4.5 Discount from IV: 2.2% 19.6% Discounted Cash Flows: Valuation by Estimated EPS and PE: Valuation by Price-to-book Ratio: Fair Value from Analysts Cash flow growth is inconsistent 2011: : : 5.26 RHB: 2.99 HLG: 4.5 ECMLIBRA: Current EY% or Rolling 4Q EY% > 6% CU EY%: Rolling 4Q EY%: Current DY% or Rolling 4Q DY% > 6% CU DY%: 0.83 Rolling 4Q DY%: 1.657

12 Drivers, Potential Risks and Analysts' Reports Reported Date Subject Details Type Created Date 11/11/2011 AIRASIA (FV RM BUY) See attachment Analyst Report 11/15/2011 Company Update: Ancillary Income to Drive Growth 10/10/2011 AIRASIA (FV RM BUY) See attachment Analyst Report 10/12/2011 Company Update: Optimism Afloat 8/19/2011 AirAsia passengers up in July PETALING JAYA: The number of passengers carried by AirAsia group last month rose 19.3% to million from million a year ago. Driver 8/19/2011 AirAsia Malaysia contributed about 58.2% or 1.54 million (a 12.1% year-on-year increase) of the group s passenger traffic in July, said AirAsia Bhd in a statement yesterday. The group s Thai and Indonesian units carried 567,100 and 541,220 passengers respectively in July, it said. The load factor for the group rose by 3% year-on-year to 82% while revenue passenger kilometres increased to 3.1 million, up 20.5% year-on-year compared with 2.6 million a year ago.

13 8/18/2011 AirAsia to charge RM10 check-in fee AirAsia will charge a RM10 check-in fee per passenger for all the flights whose bookings are made from 21 Sept onwards to check in via conventional check-in counters. The airline said the additional charge is part of its plan to aggressively grow revenue through ancillary income and services, instead of transferring the full cost, amid escalating fuel prices, to its passengers. However, the charge is not applicable for passengers opting for self checks-in. The fees apply for all AirAsia domestic and international flights originating from airports in Malaysia. (Business Times) Potential Risk 8/18/2011 8/16/2011 New AirAsia Philippines vows to be substantially cheaper CLARK, Philippines: AirAsia launched a new affiliate in the Philippines yesterday, promising to undercut its rivals on regional and domestic routes. To minimise costs and avoid Manila s crowded terminals, AirAsia Philippines will fly out of a former US air base that had been turned into an industrial zone in Clark about 90 minutes drive north of the country s capital. We will be substantially cheaper (than our competitors), AirAsia Philippines chief executive officer Marianne Hontiveros said at the launch in Clark where she oversaw the arrival of the airline s first Airbus A320. Driver 8/16/2011

14 8/12/2011 Up to RM1.2b cost savings for MAS and AirAsia PETALING JAYA: The collaboration forged between Malaysia Airlines (MAS) and AirAsia Bhd on Tuesday can turn in up to RM1.2bil in cost savings for both the airlines, said MAS newly appointed executive director Mohammed Rashdan Mohd Yusof. We have already identified savings in the area of procurement, but I cannot tell you exactly where now... but the capital expenditures are large. We have basically looked at a very detailed study done by Bain & Co and there are many areas where we can cooperate and save,'' he said in an interview with StarBiz yesterday. Though these are preliminary figures and Rashdan's figures are a bit conservative, others are more bullish to say the cost savings could be as high as RM1.6bil. An area that MAS will focus on to save cost is in aircraft purchases, engines, spare parts purchasing. These are big ticket items and AirAsia boss Tan Sri Tony Fernandes and his partner Datuk Kamarudin Meranun have the expertise and bargaining clout and savings culture'' which MAS could leverage upon. Another area is on training where both can collaborate and reduce redundancies to save cost. There are so many areas of collaboration like joint training Driver 8/12/2011

15 8/9/2011 Analysts say MAS stands to benefit more than AirAsia PETALING JAYA: Although it remains to be seen if a proposed share swap among key shareholders of Malaysia Airlines (MAS) and AirAsia can save the former from its troubles in the long term, MAS stands to benefit the most from the transaction. Under the highly anticipated deal to be announced today, AirAsia group chief executive officer Tan Sri Tony Fernandes and his Tune Air partner and AirAsia deputy CEO Datuk Kamarudin Meranun are expected to swap a portion of their AirAsia shares for 20% of Khazanah Nasional Bhd's stake in MAS. Analysts said MAS would gain the most from this deal on an individual stock basis, as MAS was coming off from a very low base and given the negative investor sentiment as the airline is expected to post full-year operational losses this year. Standard & Poor's equities research analyst Shukor Yusof attributed the gain to AirAsia's market position, expertise and slick management. We think this is certainly the hope of Khazanah (in entering such a deal). However, the cost differentials for Khazanah and Tune Air suggest that the former will need to pay a premium for AirAsia's stake based on its last closing share price, while Tune Air will find the purchase of MAS stock relatively cheap. It seems like a sizeable gain for Tune Air's main shareholders Driver + Potential Risk 8/9/2011

16 8/9/2011 Rivals MAS and AirAsia to become PETALING JAYA: National carrier Malaysia Airlines and low-cost allies carrier AirAsia Bhd's major shareholders Khazanah Nasional Bhd and Tune Air Sdn Bhd will today announce a landmark share swap deal worth just over RM2bil which will turn the long-time bitter rivals into collaborating partners. According to sources, under the share swap deal, Khazanah will acquire a 10% stake in AirAsia from Tune Air, a private vehicle controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun. As at July 6, 2011, Tune Air owned a 26% stake in AirAsia. Sources also said Khazanah was in talks to acquire a 10% stake in long haul low cost carrier AirAsia X but this would be announced at a later date. As part of the agreement, a source said MAS would issue new shares to Tune Air which would end up with a 20% stake in the national carrier. Khazanah, which has a controlling stake of 69% in MAS, will continue to remain the single largest shareholder in the national airline after the exercise. The source added that MAS, which was in dire need for fresh capital, would also make a rights issue very soon. The valuation of the swap will be based on the recent share price of both companies as the exercise involves noncontrolling stakes. Trading in both counters are suspended Driver + Potential Risk 8/9/2011

17 8/9/2011 Oil price falls to lowest for this year NEW YORK: Oil plunged to its lowest price of the year Monday on concerns about the slowing global economy and future demand for oil and gas. Benchmark West Texas Intermediate crude fell $5.57, or 6.4 percent to settle at $81.31 per barrel on the New York Mercantile Exchange. That is the lowest settlement price of the year for crude, but it's still higher than the $71.63 per barrel low of the past 12 months. Oil hit that on Aug. 24 of last year, when a combination of disappointing economic news and abundant supplies drove down prices. Driver 8/9/2011

18 8/2/2011 AIRASIA EXPLAINS USE & FINANCING FOR 200 UNITS OF AIRBUS A320NEO AIRCRAFT AIRASIA which on Jun 23, 2011 ordered 200 units of AIRBUS200 A320Neo aircraft valued at US$18.5 bil said that the new aircraft would cater for markets in the Philippines, Indonesia, Thailand, Vietnam and other joint venture initiatives. "... We will still have a lot of growth for our Malaysian operations and there should be no shortage as to where to put the planes..." he told THE STAR in a phone interview. The delivery of the 200 planes is expected between 2016 to AIRASIA has the capacity to take up to 500 aircraft. "... With the trajectory of 500 aircraft, it will make us one of the biggest airlines in the world..." he added. With the new order, AIRASIA is the world's biggest airline customer for AIRBUS for the single aisle A320 family with an order for 375 aircraft to date. So far, 89 A320s have been delivered. The order was bigger than the US$16 bil purchase for 180 aircraft from India's INDIGO. FUNDING FOR PURCHASES On funding, FERNANDES said that it would not be any different from the others that the Company had funded previously. "... We have strong cashflow. To fund this new order is a function of cash generation and debt financing. By the time these new ones come in, many of the A320s would have been paid... We have been taking 16 to 18 aircraft a year and we were then a smaller company..." he said. Driver 8/8/2011

19 7/21/2011 AirAsia Japan Joint Venture AirAsia Berhad ( AirAsia or the Company ) is pleased to announce that the Company will today be executing a Shareholders Agreement ( the Agreement ) with All Nippon Airways Co., Ltd ( ANA ) of Japan. The Agreement is formalised for the purpose of forging a joint venture cooperation between AirAsia and ANA to establish a low cost airline in Japan based on the successful AirAsia business model ( the Joint Venture ). The company to be incorporated in Japan for the Joint Venture is named AirAsia Japan Co., Ltd. ( AirAsia Japan ). Driver 7/30/2011

20 7/7/2011 AirAsia boosts plane order AirAsia Bhd will buy an extra 100 Airbus A320neo jets, taking its record-breaking order to 300 planes, a source said. The deal will make the budget airline one of the world s largest carriers. The two sides announced a US$18.2bil deal for 200 planes at the Paris air show last month, shattering aviation records for the largest ever airline order. The additional order takes the list price of the contract to a staggering US$27bil. The bumper order highlights Airbus growing lead over Boeing and throws the spotlight on AirAsia s aggressive growth plans at a time when high oil prices and an uncertain global economy are clouding the outlook for travel demand. Analysts expect the extended order to drive AirAsia s expansion as it competes with carriers such as India s IndiGo, Singapore s Tiger Airways and Australia s Jetstar. AirAsia had the first-mover advantage and it continues to stay ahead of the game by ordering fuel-efficient planes and keeping the size growing, said an aviation analyst with a Malaysian investment bank who declined to be identified due to company policy. But the key risk is if expansion plans do not succeed. The Malaysian base is fairly saturated, so if the other markets do 6/27/2011 AirAsia the best for third year in a row AirAsia has been named the world s best low-cost airline for the third consecutive year, according to London-based aviation consultants, Skytrax. Driver + Potential Risk Driver 7/30/2011 7/30/2011

21 6/23/2011 PURCHASE OF 200 AIRBUS A320 NEO AIRCRAFT BY AIRASIA BERHAD AirAsia Berhad ( AirAsia or the Company ) is pleased to announce that it has signed a Purchase Agreement with Airbus S.A.S ( Airbus ) to purchase two hundred (200) Airbus A320 NEO aircraft ( A320 NEO Aircraft ). With the purchase of the A320 NEO Aircraft, the aggregate total of AirAsia s aircraft order for the AirAsia Group including the current A320 aircraft will be three hundred and seventy five (375) aircraft orders comprising one hundred and seventy five (175) firm orders of the current A320 aircraft and two hundred (200) firm orders of the A320 NEO Aircraft. The A320 NEO Aircraft shall be equipped with set of a new engine type developed by CFM International called the LEAP- X1A26 engine ( the LEAP-X Engine ). In respect of the LEAP-X Engine, the Company has also signed a Purchase Agreement together with the Rate per Flight Hour Agreement for engine maintenance services (collectively the LEAP-X Engine Agreements ). The A320 NEO Aircraft Purchase Agreement and the LEAP-X Engine Agreements were signed in Paris on 23rd June Driver + Potential Risk 7/30/2011

Asia s most profitable LCC airline AirAsia dominates 2012 with another outstanding year-end result

FOR IMMEDIATE RELEASE Asia s most profitable LCC airline AirAsia dominates 2012 with another outstanding year-end result Note FYE December 2012: Revenue up 11%; Profit After Tax up 238% 4Q2012: Revenue