AirAsia’s disposal in AAE Travel provides positive long-term catalyst
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 with 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 market AirAsia Exp’s entire shareholding in joint venutre (JV) company AAE Travel.
This amounted to 6.14 million ordinary shares, creating approximately 25 % of the full total issued and outstanding shares to Expedia for a cash consideration amount of US$60 million – or RM240 million, at the exchange rate of US$1 to RM4.
AirAsia highlighted a total gain of RM181 also.6 million will undoubtedly be recognised at group consolidated level.
“We believe its divestment in the JV provides positive catalyst for the long-term growth of the combined group,” the study arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said in an email with this move.
“This is area of the group’s intend to put digitalisation at its core, to push up revenue and lower operating expenses (opex).”
Moving forward, MIDF Research believed AirAsia’s digitalisation efforts to bear fruits, making method for further improvement in the group’s operations.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) was also positive with this disposal, stating it had been consistent with AirAsia’s strategic direction to spotlight their core airline business by growing its air operator’s certificates (AOCs).
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Additionally, this disposal shall create a lighter balance sheet with net gearing reduced from 0.9-fold, by the initial quarter of 2018 (1Q18), to 0.87-fold.
“Nonetheless, we usually do not expect any special dividends out of this particular disposal once we believe that it will be useful for working capital,” Kenanga Research said.
The research arm noted that for financial year 2018 (FY18), AirAsia plans to put higher concentrate 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, that have shorter turnaround time and improving profitability from higher plane utilisation hence.
“We expect further improvement in utilisation post restructuring of routes. With regards to further asset divestment, we have been seeking to potential sale of Santan and Red Cargo forward.”