KUCHING: AirAsia Group Bhd’s (AirAsia) stake disposal in AAE Travel Pte Ltd (AAE Travel) provides positive catalyst for the long-term growth of the group, analysts say on this latest development.
In a filing on Bursa Malaysia, AirAsia said its wholly-owned subsidiaries, AirAsia Exp and AirAsia Bhd (AAB), have executed a share purchase agreement with Expedia Southeast Asia Pte Ltd and Expedia Inc (Expedia) to sell AirAsia Exp’s entire shareholding in joint venutre (JV) company AAE Travel.
This amounted to 6.14 million ordinary shares, making up approximately 25 per cent of the total issued and outstanding shares to Expedia for a cash consideration sum of US$60 million – or RM240 million, at the exchange rate of US$1 to RM4.
AirAsia also highlighted that a total gain of RM181.6 million will be recognised at group consolidated level.
“We believe its divestment in the JV provides positive catalyst for the long-term growth of the group,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said in a note on this move.
“This was part of the group’s plan to put digitalisation at its core, to push up revenue and bring down operating expenses (opex).”
Moving forward, MIDF Research believed AirAsia’s digitalisation efforts to bear fruits, making way for further improvement in the group’s operations.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was also positive on this disposal, stating it was in line with AirAsia’s strategic direction to focus on their core airline business by growing its air operator’s certificates (AOCs).
Additionally, this disposal will result in a lighter balance sheet with net gearing reduced from 0.9-fold, as of the first quarter of 2018 (1Q18), to 0.87-fold.
“Nonetheless, we do not expect any special dividends from this particular disposal as we believe that it would be used for working capital,” Kenanga Research said.
The research arm noted that for financial year 2018 (FY18), AirAsia plans to place higher focus on their domestic routes by transferring out their longer haul four-hour flights (Kuala Lumpur-Changsa, Kuala Lumpur-Kaohsiang) to AirAsia X (AAX) for shorter haul domestic flights, which have shorter turnaround time and hence improving profitability from higher plane utilisation.
“We expect further improvement in utilisation post restructuring of routes. In terms of further asset divestment, we are looking forward to potential sale of Santan and Red Cargo.”