Corporate proposals will unlock AirAsia’s value — analysts
KUALA LUMPUR: Analysts across the board laud AirAsia Bhd’s (AirAsia) plans to replace its current listing status with a holding company, a reorganisation of its existing corporate structure, and a listing of Indonesia AirAsia through a reverse takeover exercise of PT Rimau Multi Putra Pratama TBK (RMPP), which is listed on the Indonesia Stock Exchange (IDX).
The proposals are indeed value-enhancing. The change of listing status, with a new holding company, AirAsia Group Bhd, assuming the role of listed entity is positive in researchers’ view at MIDF Amanah Investment Bank Bhd (MIDF Research).
“With the reorganisation, there would be clearer segregation of entities – such as airlines operations, intellectual property, digital services, ground handling, cargo and others – compared to the current Group structure which is opaque,” it said in a note on the corporate uptake.
“In addition, the new structure marks the first step in AirAsia’s goal in creating a single Asean airline.”
In a separate note, Kenanga Investment Bank Bhd (Kenanga Research) believed the new AirAsia structure would be more ‘flat’ as compared to the existing structure, whereby currently Malaysia AirAsia Bhd holds effective stakes between 20 to 49 per cents in Indonesia, Philippines, Thailand, Japan and India through their Investment Holding Co (AirAsia Investment Ltd).
“This move is in line with their plans to eventually have all existing AOC associates to be 100 per cent wholly-owned subsidiaries of the NewCo,” it said.
“That being said, we opine that there are various regulation hurdles in respective countries to overcome and the idea to have all AOC as 100 per cent subsidiaries under one group might not materialize in the near term.”
Kenanga Research believed that AirAsia is targeting Thailand operations to be consolidated into their accounts by the last quarter of this year and list its Philippines division as well.
MIDF Research noted that Indonesia AirAsia’s listing on the IDX would allow it to tap into the Indonesian equity markets for funding while allowing AirAsia to unlock the value of its Indian arm as a listed entity.
“This is not forgetting the sale of Asia Aviation Capital (AAC),” MIDF Research reminded. “Group chief executive officer Tan Sri Tony Fernandes reiterated that the sale of AirAsia’s leasing arm, AAC is on track, with the board endeavouring to maximise the value of the unit.”
In regard to the disposal of AAC, Kenanga Research said AirAsia has narrowed their bids to two final bidders and are underway to finalize the agreement which we believe will be concluded by year end.
“At this juncture, we remain confident in AirAsia’s ability to profitably hive off its aircraft leasing arm,” MIDF Research said.”
Another corporate possibility opined by MIDF was AirAsia Expedia possibly being next on the list of divestment.
It noted that AirAsia maintains a 25 per cemt stake in AirAsia Expedia, of which its intention to pare down its stake is well known. Back in February 2015, AirAsia sold a 25 per cent stake in AirAsia Expedia for US$86.25 million, booking a gain of US$78.76 million.
“We believe that AirAsia Expedia could be worth more today, considering that the travel and leisure industry has expanded since then. We believe that the divestments – AAC, AirAsia Expedia and AACOE – could likely lead to special dividends, which we have yet to factor into our forecasts.”