Bumper dividend from AirAsia to shareholders from leasing arm sale

Next move: Fernandes had earlier said that the sale of the budget carrier’s engineering and food businesses would be next following the disposal of its leasing unit Asia Aviation Capital Ltd.

PETALING JAYA: The dust has not settled on the disposal of budget carrier AirAsia Bhd’s leasing unit Asia Aviation Capital Ltd (AAC) to BBAM Ltd Partnership for US$1.18bil (RM4.619bil), but analysts are already speculating a windfall for shareholders as huge as 60 sen to 70 sen a share.

Speculation was fuelled by the company’s announcement to the stock exchange that about RM2.6bil or 74.4% of the proceeds “shall be distributed as a special dividend with the quantum to be determined” after the monies have been received.

The sale to BBAM, the world’s third-largest aircraft lessor, will see AirAsia raking in proceeds of RM3.8bil. The deal involves the sale of 182 current and future aircraft with engines.

The deal has an enterprise value of RM11.096bil. Enterprise value includes debt but does not include cash and cash equivalents.

An analyst, who declined to be named, said based on the entire sum of RM2.6bil, the dividend payout could be 78 sen a share, but this would depend on the entire RM2.6bil being disbursed to shareholders.

“We believe AirAsia could pay about 60 sen a share in special dividend,” another analyst from a local brokerage said, pointing out that if AirAsia were to include proceeds from the recent sale of the ground-handling unit as dividend, the amount could be well over 70 sen a share.

CIMB Research said after taking into account debt repayment and costs, it estimated that a special dividend per share of only 75 sen may be paid below its previous estimate of 85 sen. “Our target also includes a special dividend estimate of RM1.86”.

AirAsia’s shares closed at a record high of RM4.60 a share, up 22 sen. The counter was suspended from 9am to 2.30pm yesterday. Tan Sri Tony Fernandes, the budget carrier’s co-founder and group chief executive officer, had mentioned about the disposal of the non-core assets to fully focus on the airline business before.

Besides the recent disposals, other assets that have been disposed include those involved in training and travel.

“This is a perfect outcome to a strategy we started in 2004 and I’m thrilled at the execution of our long-term vision. We have now disposed of most of our physical non-core assets and we are thrilled to be embarking on our new digital strategy, which will build a very valuable group of assets,” Fernandes said. He had earlier said the sale of the engineering and food businesses would be next.

“It is good that the leasing unit deal happened, as we have been worried since it has taken so long. But now, we are counting on the dividends that the company will pay out and a minimum of 70 sen should be the level,” one analyst said, noting that if the deal were concluded last year, the proceeds would have been higher.

“Even though the deal is done, it is not as lucrative as it would have been if it was done last year. This is based on the fact that the ringgit to the US dollar was at 4.30 to US$1. Now, the ringgit has strengthened to 3.90. On top of that, the aircraft by value terms is also a bit lower. Despite all that, it is a big relief,” he added.

Apart from the RM2.6bil, AirAsia will use the remaining proceeds to pare debts of RM788mil with another RM112mil for transaction cost. The entire deal will wipe out about RM7.43bil of net debt from its balance sheet as at the end of December, and upon completion, its net gearing will be reduced to 0.43 times.

Under the terms of the deal, FLY Leasing Ltd, Incline B Aviation Ltd Partnership and Nomura Babcock and Brown will buy 84 aircraft and 14 engines, of which 79 aircraft and 14 engines will be leased back to AirAsia and its affiliates.

FLY and Incline will also buy 48 aircraft to be delivered to AirAsia, which has 295 aircraft on order with Airbus, which includes the 30 aircraft it will take delivery this year.

Apart from cash, AirAsia will get non-cash considerations of US$50mil in FLY American Depositary Shares, which will result in it owning about 10.2% of FLY.

AirAsia will also commit US$50mil to Incline Parallel Funds, which will invest alongside the Incline Aviation Master Fund in global aviation investments.

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