KUALA LUMPUR: Shares of AirAsia Bhd staged a rebound yesterday, after the budget airline issued a four-page statement to assure investors that it has a “strong balance sheet, is rich in assets and has a good business outlook”.
The stock rose as much as 9.8% to hit its intra-day high of RM1.68 on Bursa Malaysia, before easing back to close the day at RM1.67, with 96.72 million shares traded. It was the most active stock yesterday.
With the current price, its market capitalisation stood at RM4.65 billion. However, the stock has lost 27% or RM1.58 billion of its value since last Tuesday, after Hong Kong-based research firm GMT research announced that it had written a report on AirAsia questioning its accounting and cash flow. A main concern was whether the company would be able to retrieve outstanding amounts due from its loss-making associates.
AirAsia (fundamental: 0.2; valuation: 1.4) saw its share price dip to a five-year intra-day low of RM1.43 on Wednesday. On June 9, the stock closed lower at RM2.10.
It is worth noting that the airline’s shares have become the target of short sellers, with over 8.11 million shares worth RM15.06 million sold short between June 9 and 16.
In a report yesterday, HLIB Research said AirAsia’s management had also explained in a one and a half hour long analyst conference call on Wednesday that it is expected to retrieve at least RM1 billion from its associates by 2017 through various steps.
“They are raising share capital to approximately US$100 million (RM371 million); raising a minimum of US$100 million each from new investors through convertible bond issuance from Indonesia AirAsia (IAA) and Philippines AirAsia (PAA) respectively; and an initial public offering (IPO) for IAA and PAA in 2017,” it said.
HLIB Research is of the view that the selldown in AirAsia shares in the past week is overdone.
“We remain positive with AirAsia’s performance this year, given a rationalised market from Malaysian Airline System Bhd’s restructuring and route rationalisation,” it said.
RHB Research said it is optimistic on AirAsia’s outlook on the back of a turnaround in its associates IAA and PAA.
“So far, its auditors are satisfied with management’s turnaround plan at IAA and PAA, noting that forward loads and yields over the coming quarters are showing signs of improvement.
“Both IAA and PAA are lagging behind competitors such as Citilink and Cebu Air. In the possible absence of equity funding, we remain positive on its associates’ outlook,” it said.
Meanwhile, Maybank Investment Bank Bhd aviation analyst Mohshin Aziz believes that things will settle soon, and AirAsia’s fundamentals will be re-looked at.
“The stock is very cheap, trading at only 5.6 times its financial year 2015 price-earnings ratio and trading well below its book value. There are questions about the books I agree, but there is definitely no questioning the cash profits that this juggernaut is going to churn,” he said in a note to clients yesterday.
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. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.
This article first appeared in The Edge Financial Daily, on June 19, 2015.