Share price is falling but Fernandes says AirAsia has done everything right. Why?

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KUALA LUMPUR: AirAsia Group Bhd group chief executive officer (CEO) Tan Sri Tony Fernandes on Thursday said the low-cost carrier made all the right moves in 2018.

His comment came after the low-cost carrier announced its largest ever quarterly loss of RM394.97 million, prompting some analysts to downgrade the group. And the airline share price has tumbled from the peak of RM3.84 a year ago.

In a tweet from his handle @tonyfernandes yesterday, Fernandes said, “Made all the right moves in 2018 cutting-cost, adding capacity, taking market share and setting up new business like Red Logistics which is going to be huge.

“AirAsia operates the group’s logistics businesses via RedCargo Logistics Sdn Bhd. The stars appear to be lining up. Asean airlines will all make money this year. India and Japan reduce losses. Cash strong. Oil is 54% hedged and stable. Currencies stronger,” read the tweet.

However, Fernandes said AirAsia was really hurt by the closure of Boracay in the Philippines and numerous national disasters in Indonesia which led to huge losses.

On the co-founder’s comment thatAirAsia Group was doing all the right things, for shareholders one could be the bumper dividend that it has declared for the financial year ended Dec 31, 2018 (FY18).

The airline has rewarded its shareholders generously with a total dividend of 24 sen per share along with a special dividend of 40 sen, translating into a payout ratio of 108% — it pays out more than it earns to reward shareholders. Its annual earnings per share for FY18 came in higher at 59.2 sen versus 49.3 sen the year before.

Being the controlling shareholder Fernandes, who owns the most shares, has more reason to smile.

His two investment vehicles — Tune Live Sdn Bhd and Tune Air Sdn Bhd, which collectively hold 1.075 billion shares, or a 32.18% stake, are receiving RM688 million cash in dividends for FY18.

It is worth noting that the low-cost carrier declared 12 sen dividend per share in FY17. For the block of 1.075 billion shares, Fernandes and his partner Datuk Kamarudin Meranun received dividends of RM210 million in FY17.

The duo are surely laughing all the way to the bank for the good investment they made in the airline.

To recap, in April 2016, Fernandes and Kamarudin announced a massive RM1 billion capital injection by them through placement of new shares into AirAsia.

Some 559 million new shares, or a 16.7% stake of the enlarged capital were then issued to their vehicle, Tune Live, at RM1.84 each.

This bumped up their shareholdings to 32.5% from 19%.

AirAsia share price has been on the decline since the first quarter last year from the peak of RM3.84 in March last year to a low of RM2.07 in October last year.

Still, yesterday’s closing of RM2.77 is higher than the placement price of RM1.84 then.

The aviation stock succumbed to heavy selling pressure yesterday amid the gloomy outlook that the group might have seen its peak in terms of profitability as some analysts described having combed through the latest financial numbers. Its share price slid 8.9% or 27 sen to RM2.77.

Nonetheless, Fernandes will probably disagree with such a view as the airline has made the right moves.