AirAsia declares record dividend despite lower profit

This article first appeared in The Edge Financial Daily, on May 30, 2019.
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KUALA LUMPUR: AirAsia Group Bhd’s net profit came in substantially lower at RM96.09 million for the first quarter ended March 31, 2019 (1QFY19), down 92% against RM1.14 billion for the previous corresponding period, due to the absence of hefty one-off extraordinary gains in the quarter under review.

The low-cost carrier’s earnings before interest, taxes, depreciation and amortisation, however, grew 6% to RM678.4 million from RM642.9 million a year earlier, according to its filing with Bursa Malaysia.

Still, excluding a gain on partial disposal of investment in a former subsidiary and a remeasurement gain on retained interest in a former subsidiary totalling RM885 million, AirAsia’s net profit of RM96.09 million was lower compared with the adjusted net profit of RM256 million for the previous corresponding period.

Nonetheless, quarterly revenue grew 13% to RM2.88 billion, against RM2.56 billion a year ago, attributed to an 18% increase in total passengers carried and a one-percentage-point improvement in load factor to 88%.

Despite lower earnings, AirAsia’s shareholders, particularly co-founders Tan Sri Tony Fernandes — who is the group chief executive officer — and Datuk Kamarudin Meranun, have good reason to celebrate as the board has declared a special dividend of 90 sen per share, the highest-ever dividend for the low-cost carrier.

The low-cost carrier has turned generous in dividend payment. For the financial year ended Dec 31, 2018 (FY18), the airline paid out 64 sen per share, translating into a payout ratio of 108%, and 12 sen per share for FY17. AirAsia has now declared dividends of RM1.66 per share since FY17.

Coincidentally, the bumper dividends came after the massive share placement to Tune Live Sdn Bhd, of which Fernandes and Kamarudin are the only two shareholders. Some 559 million new shares, or a 16.7% stake, of the enlarged capital, were then issued to Tune Live at RM1.84 each.

The duo currently control a 32.5% stake, or 1.075 billion shares, in AirAsia through Tune Live and Tune Air Sdn Bhd. A special dividend of 90 sen per share means the two co-founders are expecting a dividend cheque of RM967.5 million.

In the financial result announcement, the low-cost airline said the results for the previous year’s corresponding quarter included a gain on partial disposal of a subsidiary of RM350.3 million and a remeasurement gain on retained interest in a former subsidiary of RM534.7 million.

Meanwhile, the results for 1QFY19 were impacted by an additional charge of RM38.2 million, following the adoption of Malaysian Financial Reporting Standards 16.

Among its associate companies, only Thai AirAsia reported a net profit, albeit lower at 902.92 million baht (RM119.02 million) versus 1.83 billion baht a year earlier, while AirAsia India and AirAsia Japan both reported net losses for the quarter.

Looking ahead, the group remains positive that the overall core results of the group for 2019 will be better than 2018’s, barring unforeseen circumstances.

AirAsia said it sees strong load factor momentum for the rest of 2019, adding that it maintains its strategy to gain dominance in the countries it operates in, especially in the Asean region.

It has planned for a net fleet growth of 18 aircraft, with a substantial portion of its new fleet bound for AirAsia India, ahead of expected changes in India’s operating landscape in the near future, on top of its target to fly internationally by year end.

While it does not see any material negative impact from the US-China trade war, AirAsia said currency weakness remains a concern for the group.

Meanwhile, the group said it will proceed with its transformation into a travel and financial platform. Its teleport business — the logistics business — is expected to see growth as the group seeks tie-ups with different airlines and small and medium enterprises.

AirAsia shares gained one sen to RM2.63, translating into a market capitalisation of RM8.79 billion, before trading of the stock was suspended yesterday. It will resume trading today.