Quantamental Investing to beat Benchmarks

A. Stotz Investment Research

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AIRA: Innovative Budget Carrier Is Cruising Nicely

AirAsia: Budget Carrier's Momentum Is Cruising Nicely

AIRA (AIRA MK): Budget Carrier Continues Expansion

CEO, A. Stotz Investment Research

Dr. Andrew Stotz, CFA

Equity Bottom-Up

<ul><li>Improving asset turnover, strong stock price momentum, and high level of cash sales relative to its sector</li><li>AIRA plans to expand its fleet by 30 new aircraft in 2018 after adding 24 planes in 2017; meanwhile the number of passengers carried in 2017 rose by 11% YoY driven by increased capacity</li><li>Moving to an asset-light model through disposal of its fully owned aircraft leasing company, Asia Aviation Capital, for US$1.2bn. The deal is expected to be completed in 3Q18 and should further reduce gearing</li><li>Trades in line with Asia Transportation at 18CE* 1.4x PB but offers a much better ROE</li><li>Risk: Accidents, terrorism, and possible volcano eruptions in SEA</li></ul><p><em>* Consensus Estimates</em></p>

Improving asset turnover, strong stock price momentum, and high level of cash sales relative to its sectorAIRA plans to expand its fleet by 30 new aircraft in 2018 after adding 24 planes in 2017; meanwhile the number of passengers carried in 2017 rose by 11% YoY driven by increased capacityMoving to an asset-light model through disposal of its fully owned aircraft leasing company, Asia Aviation Capital, for US$1.2bn. The deal is expected to be completed in 3Q18 and should further reduce gearingTrades in line with Asia Transportation at 18CE* 1.4x PB but offers a much better ROERisk: Accidents, terrorism, and possible volcano eruptions in SEA* Consensus Estimates

AirAsia Berhad

AIRA: Moving to an Asset-Light Model