AIRASIA GROUP BHD

By KAF Securities Buy Target price: RM5.00

AIRASIA Group Bhd announced that it is selling its remaining 25% stake in AAE Travel Pte Ltd for US$60mil (RM240mil) cash.

AAGB is selling the JV company to Expedia Southeast Asia Pte Ltd, which holds the remaining 75% stake.

The move is part of the group’s strategy to divest its non-core assets.

The purchase consideration was arrived at after taking into consideration AAE’s profit after tax for FY17 and net of concurrent purchase of AirAsiaGo.com domain names and related assets from the joint venture company by Travel360.

AAGB expects to realise a gain of RM230.4mil (seven sen per share) from the sale in the third quarter of 2018.

It also expects its net assets and cash balance to increase by RM230.4mil and RM245.5mil, respectively.

On the consolidated level, the group expects to realise a gain of RM181.6mil (five sen per share).

Management had indicated that proceeds from the sale would be used to develop “big unicorn” products such as BigPay, Travel 360, Redbox Logistics and Ourshop.

“We do not discount a potential dividend from the AAE sale, given that management had earlier indicated that it intends to pay dividends from the sale of its non-core assets,” said KAF Securities.

The sale of its leasing company, AAC, is expected to be completed by Oct.

The group had transferred 39 aircraft and received proceeds of US$501.6mil (RM2bil).

It is on track to dispose the remaining 45 aircraft and 14 engines. AirAsia expects to realise a gain of RM1.4bil (42 sen per share) and RM4.4bil proceeds.

“We believe about 57% (RM2.5bil or 74 sen) of the proceeds could be distributed as dividends.

“We maintain our ‘buy’ recommendation and target price.

“While higher fuel price and a weaker ringgit is a concern, we believe these are partly mitigated by higher ancillary income and fares,” said KAF Securities.

AirAsia’s second quarter results are targeted for release on Aug 30.