AIRASIA - Broadly in line; maintain OUTPERFORM (CIMB)

1Q core net profit was 17% of our fullyear forecast, which is broadly in line after accounting for seasonality. The airline experienced strong demand, which pushed up load factors, and good ancillary income growth. It also benefited from the weaker-than-expected US$. Our FY11 reported EPS forecast is largely unchanged but our FY12-13 numbers are reduced by 4-7% for higher staff costs. However, because of the potential listing of two associates which are becoming profitable, we have redefined core EPS to include share of associate profits even though AirAsia does not equity-account them. This leads to 17-33% core EPS upgrades, which lift our target price from RM3.40 to RM4.20, still pegged to 9x CY12 P/E. Potential re-rating catalysts include successful 4Q associate IPOs, reduction in gearing and relative resilience to higher fuel prices.