PETALING JAYA: Analysts remain positive on AIRASIA Group Bhd’s de-gearing move as it proposes to dispose 25 aircraft for US$768mil (RM3.22bil), which will likely result in another round of special dividend.
In addition, the disposal will further strengthen the group’s net cash position, which shall in turn assist AirAsia’s digitalisation efforts and aid any required investments.
According to MIDF Research, the remaining proceeds to AirAsia from the proposed disposal was estimated at RM1.3bil, after taking into account the repayment of existing debt related to the 25 aircraft and the expenses incurred for the proposed disposal.
As such, AirAsia’s net cash position will increase from RM1.23bil as of September 30, 2018, to approximately RM2.43bil.
Kenanga Research said AirAsia would be registering one-off net gain of RM174.9mil from the transaction.
“Assuming 30% pay-out from its remaining proceeds from the Castlelake deal after settling its debts and expenses, we would expect special dividend of 10 sen to 12 sen should management be feeling generous in rewarding its shareholders again,” it said.
AirAsia had on Monday announced that it would be disposing 25 aircraft to global fund Castlelake, and four additional new aircraft slated for delivery in 2019 for a price that has yet to be finalised, which will be excluded from the sale consideration of US$768mil.
The aircraft will then be leased back to AirAsia.
AirAsia had previously sold 182 current and future aircraft with engines via the disposal of its leasing unit, Asia Aviation Capital Ltd (AAC) to BBAM Ltd Partnership for US$1.18bil in March this year.
The management rewarded its shareholders with 40 sen special dividend from the BBAM deal proceeds.
The proposed disposal is estimated to provide annual savings of expenses related to financing and depreciation worth RM90.1mil and RM196.8mil respectively, partially offsetting rental expenses of RM348mil.
Going forward, AirAsia is still pursuing its expansion plan to grow their market share while its competitors are scaling back capacity.
The group remains hopeful that they are able to turnaround Philippines and Indonesia operations by 2019.
“We believe that AirAsia could be using a major part of the proceeds from Castlelake deal to scale its digital business which might transform them into the next ‘Unicorn’, rivalling names like Grab and Go-Jek in South-East Asia, which are all asset-light.
“On its digital transformation front, AirAsia is actively engaging with their partners, such as Google, Airbus (Skywise) and Palantir to integrate machine learning to their big data platform to improve airline operations which would lead to cost savings in the future,” said Kenanga Research.
As for fuel hedging, the management has hedged Brent at US$67.24 per barrel for 48% during the first quarter of 2019, and US$65.40 per barrel for 27% during the second quarter of 2019.
AirAsia closed 3.3% higher at RM2.83, traded on a volume of 10.82 million shares.
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