Another potential beneficiary of the tourism play in Malaysia is Air Asia, which I have also put through my spreadsheet and scored. As you can see it doesn’t do very well due to eroding profit margins. However as an airline company it has the advantage of being in a business where barriers to entry are extremely high. You can see also that it has been busy building up its operations and grown its fleet – which has caused havoc on the liability/asset ratio and profit margins but necessary to maintain growth (which it still enjoys). That is still why it has been rewarded with a PE of around 30. The big question is whether it can keep up its turnover, which it seems to be on target for despite a generally weaker travel sector before terrorism became a household word. This has been due to good management and great positioning in a new and growing market. However I would not expect any magic from this counter as its share price hasn’t moved much in the last 2 years and will prefer to wait for weakness before I go in.
