AirAsia shares fly to new all-time high

Market dealers say upside driven by prospect of special dividend payout

PETALING JAYA: Shares of AirAsia Bhd are on a tear, shooting to a new all-time high, buoyed by speculation that the low cost carrier is considering a special dividend payout.

A stronger ringgit is also a major plus for the company, which should ease its burden from foreign currency denominated debt and cushion the impact of rising jet fuel prices.

The stock added 24 sen to close at RM4.14 yesterday in a continuation of its latest leg of an upward trend since the end of November 2017.

Market dealers said that the price action is possibly linked to rising speculation of a special dividend after the completion of a shareswap agreement between its ground handling unit and Singapore’s SATS Ltd.

It was announced earlier this month that the agreement will see AirAsia realise some RM360.29mil (S$119.3mil) in gains for the company.

The corporate exercise will see AirAsia’s Ground Team Red Holdings Sdn Bhd acquiring a 80% stake in SATS Ground Services Singapore Pte Ltd.

Wire reports in November last year reported AirAsia’s co-founder and group CEO Tan Sri Tony Fernandes as saying that he would like to declare a special dividend after he sold more stakes in the low cost carrier’s food, engineering and duty-free businesses.

StarBiz reported in November last year that selling non-core assets would help AirAsia become more transparent and have better accountability while at the same time drive cost efficiencies by partnering industry experts.

MIDF Research said in a report earlier this month that a special dividend may be on the horizon for AirAsia’s shareholders.

“We believe there is a possibility of a special dividend.

“This is premised on management’s promise to pay out proceeds of business disposal. Assuming 100% pay-out of the RM360.2mil gain, the special dividend is estimated to be 10.8sen,” the research house said

MIDF Research has maintained its “buy” call on for AirAsia with a target price of RM4.02.

Its target price is derived from a forward price-to-earnings ratio of 10 times FY18 earnings per share.

“We like AirAsia because of the company continuous efforts to reinvent itself to ensure that it stays relevant in the highly competitive industry.

“AirAsia remains our top pick for the aviation sector predicated on stable demand growth with conservative available seat kilometres expansion of 10%, and new areas of growth in AirAsia India and AirAsia Japan,” MIDF Research said.

Positive sentiment on the mother stock also saw interest perking up in its call warrants.

AirAsia-C53 added eight sen or 39.02% at its close to 28.5 sen while AirAsia-C58 gained four sen, or 19.05% to 25 sen.

Interest could also be building momentum from the strengthening ringgit trade theme that has been on since the New Year.

The rationale being is that a stronger ringgit would encourage more people to travel and take to the skies.

Furthermore a stronger ringgit would help in fuel costs that is denominated usually in US dollars.

According to data compiled on the Bloomberg, there are today some 17 “buy” calls on the stock.

These analysts gave the stock a consensus 12-month price target of RM3.91, a target which has been breached after yesterday’s price move.

The company is also anticipating stronger demand and adding to its existing aircraft capacity that will give further room for growth.