Fernandes: Non-core assets sale to fund special dividends
He says the stakes are in food, engineering and duty-free businesses
PETALING JAYA: AirAsia Bhd shares rose about 5% after its co-founder said that the airline plans to sell more stakes in its non-airline businesses to fund special dividends for shareholders.
AirAsia shares gained 16 sen yesterday to close at RM3.34.
Tan Sri Tony Fernandes, the co-founder and group CEO of AirAsia, told Reuters in Singapore yesterday that “we are going to special dividend those things out”.
Fernandes was talking about selling more stakes in its food, engineering and duty-free businesses.
“There is a whole pipeline of those assets. We do joint ventures (JVs) and eventually we will dispose of those JVs. They are not core. But the relationship will always stay,” Fernandes said.
This is not the first time Fernandes has said that he wants to sell stakes in AirAsia’s noncore assets, having first spoken about it more than a year ago.
On Monday, AirAsia said it had entered into a JV deal with Singapore’s SATS Ground Services Singapore Pte Ltd for ground-handling services in Malaysia and Terminal 4 Changi.
It will also look for opportunities for ground-handling services in Thailand, Indonesia, the Philippines and with third-party airlines.
Analysts are positive about the JV with SATS, as it not only helps AirAsia unlock the value of its assets, but also helps in improving its ground-handling services in terms of cost and efficiencies.
“The JVs and partnerships would further increase transparency, accountability and efficiency as AirAsia strives to create One AirAsia,” said an industry player.
AirAsia will book in an exceptional one-off gain of RM365.7mil and cash proceeds of RM372.2mil from the JV with SATS.
The deal is expected to be completed by end-November.
Kenanga Research said “we potentially see a round of special dividends of up to 11 sen per share (assuming a 100% pay-out on gains of RM365.7mil)”.
“Our 100% dividend payout assumption is in line with management’s promise to pay out proceeds of its business disposal and we note that AirAsia had previously paid out 100% dividends on its 50% stake sale of AACE (Insurance unit) worth RM429.3mil back in August 2017.”
CIMB Research said “we are raising our target price to RM3.67 a share, adding a special dividend per share (DPS) of 11 sen arising from the sale of Ground Team Red Sdn Bhd, taking the expected total special DPS to RM1.27.”
The DPS of RM1.27 is based on several transactions being concluded.
CIMB Research added that on Aug 25, AirAsia had proposed to sell its 50% interest in AACOE (pilot and crew training school) to CAE for US$100mil (13 sen/share), with RM304.8mil in a one-off gain, also expected to be completed by end-November.
AirAsia is still negotiating the sale of around a 70% stake in Asia Aviation Capital Ltd (aircraft leasing arm), at a whole-company valuation of some US$1bil, and also a sale of its remaining 25% interest in AAE Travel for around US$100mil.
“In our estimate, the latter two are worth RM1.03/share, if the entire proceeds are paid out as dividends,” it said.