MIDF positive on AirAsia’s AAE Travel stake divestment

KUALA LUMPUR: MIDF Research is optimistic about AirAsia Group Bhd’s move to sell the remaining 25 per cent stake in AAE Travel Pte Ltd to Expedia Group Inc, extending the low-cost airline’s divestment of non-core assets.

“The divestment in AAE will provide a positive catalyst for the long-term growth of the AirAsia group.

“It was part of its plan to put digitalisation at its core to push up revenue and bring down operating expenditure.

“We believe the digitalisation efforts will bear fruit, making way for further improvement in AirAsia’s operations,” it said in a research note.

AirAsia on Tuesday said the United States-based travel technology company had acquired the remaining 25 per cent stake, held by the airline’s whollyowned subsidiary AirAsia Exp Pte Ltd, for US$60 million (RM240 million) cash.

AAE Travel is a joint venture between AirAsia and Expedia, with the latter holding a 75 per cent equity since 2015.

MIDF said following the acquisition, AirAsia is expected to record a gain of RM181.6 million (RM230.4 million at company level) in the third quarter of this year.

“The sale marked the divestment of the airline’s last non-core investment from previous joint ventures,” it said.

The joint venture was established in 2011 as part of AirAsia’s venture into the online travel agency business.

It was part of the group’s approach to offer a complete range of flights, hotels and holiday packages.

“Since its inception, the JV has provided a platform to build the group’s mobile apps, offering attractive app-only deals and bundled package savings,” said MIDF Research.

Apart from reducing debt, the proceeds from the stake sale will be used for the AirAsia group’s working capital and to develop its “big unicorn” products, such as BigPay, Travel 360 and Redbox Logistics.

The research firm has maintained its “buy” call on AirAsia shares with a target price of RM4.87.