Sale of AirAsia’s AAC and special dividend on track

REUTERS pic

KUALA LUMPUR: CIMB Research said the sale of AirAsia Bhd's aircraft leasing unit Asia Aviation Capital Ltd (AAC) is moving towards completion and special dividends could be declared this year.

The research house said the final bids for AAC was due on March 27, followed by a 4-5 week evaluation period where AirAsia will pick the buyer. 

A shareholder EGM will need to be called during 2Q17 forecast and the likelihood is for the sale of AAC to conclude within 2017F. 

“We think that AAC can be valued as high as US$1.2bil, of which AirAsia will sell a 70% stake. 

“If the entire proceeds are distributed, it will amount to a special dividend of RM1.12 per share based on an exchange rate of RM4.45,” CIMB said.

CIMB has maintained its “add” call on AirAsia with a higher target price of RM3.73

The research house said AirAsia’s 4Q16 core net profit of RM894mil was double its  forecast due to large realised foreign exchange gains. 

Excluding these items, AirAsia’s 4Q16 core net profit was RM430mil, 51% higher year-on-year and in line with CIMB’s previous forecast.

“While the demand outlook for 1Q17F continues to be robust, higher oil prices and
the weaker ringgit will impact FY17F core earnings, which we expect to fall 52% year-on-year,” CIMB said. 

Additionally, it said competition was likely to remain intensify as moving into 2H17F.

“Malindo’s remarkable capacity expansion during 2016 and planned growth in 2017F mean that AirAsia will face more competition this year.

“AirAsia is also planning to expand its capacity by eight aircraft this year, after shrinking the fleet last year. With the weaker ringgit and higher oil price, we forecast AirAsia’s FY17F core EPS to fall 52%,” CIMB said.