KUALA LUMPUR (Sept 18): AirAsia Bhd is proposing to purchase up to 10% of its issued and paid-up share capital, and will be seeking the approval of its shareholders at an extraordinary general meeting (EGM) to be convened.

According to its filing with Bursa Malaysia today, AirAsia said that a similar mandate was approved by its shareholders on June 4 last year, and the approval has since expired on June 3, 2015.

"However, the company did not make any purchase of its own ordinary share(s) of 10 sen each," said AirAsia.

The proposed share buy-back would be effective immediately upon the passing of the ordinary resolution at the EGM, and shall be valid until the conclusion of the next annual general meeting (AGM) of the company, or the expiration of the period within which the next AGM of the company is required by law to be held, whichever is earlier.

AirAsia said that the funding of the proposed share buy-back will be from internally generated funds and/or external bank borrowings, and the amount allocated for the shares purchased by AirAsia will not exceed the aggregate amount of the company's share premium and retained earnings.

Purchased shares may be cancelled or retained as treasury shares or a combination of both, while treasury shares may be distributed as share dividends, resold on Bursa Malaysia and/or subsequently cancelled.

The proposed share buy-back, if implemented, will enable AirAsia and its subsidiaries to utilise any of its surplus financial resources, which is not immediately required for other uses, to purchase its own shares from the market.

It will also be done to stabilise the market price of AirAsia shares and to prevent against speculation, when undervalued, to enhance investors' confidence.

The proposed share buy-back will also improve the earnings per share of AirAsia, which in turn is expected to have a positive impact on its market price.

"The purchased shares may be held as treasury shares and resold on Bursa Securities at a higher price with the intention of realising a potential gain without affecting the total issued and paid-up share capital of the company.

"Should any treasury shares be distributed as share dividends, this would serve to reward the shareholders of the company," said AirAsia in its announcement.

It added that the proposed share buy-back is not expected to cause any potential material disadvantage to the company and its shareholders, and will be implemented only after due consideration of the financial resources of the group and the resultant impact on the shareholders of the company.

AirAsia shares were up 8 sen, or 6.5% today at RM1.31, bringing a market capitalisation of RM3.65 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)