AirAsia’s stock skyrockets on special dividend expectation

The airline’s special dividend is expected to amount to 44 sen per share, according to Nomura


AirAsia Bhd’s shares hit a new historic high of RM4.14 yesterday backed by expectations of higher dividends.

Maybank Investment Bank Bhd analyst Mohshin Aziz said the uptick in the low-cost carrier’s share price could also be attributed to the presumption of a special dividend in the group’s upcoming results.

The carrier is expected to gain on the divestment of its leasing unit, Asia Aviation Capital Ltd, by March this year, which is part of ongoing efforts to monetise AirAsia’s non-core investments.

“I suspect it is due to dividends. If it was about management changes, we would have seen the shares climbing sooner,” Mohshin told The Malaysian Reserve.

The aviation stock gained as much as 6.2% yesterday, with some 17 million shares traded to give it a market capitalisation of RM13.8 billion.

With an estimated price tag of US$700 million (RM2.8 billion) for its leasing unit, AirAsia’s special dividend is expected to amount to 44 sen per share, according to a Nomura Securities Malaysia Sdn Bhd report.

Nomura’s Ahmad Maghfur Usman maintained a ‘Buy’ recommendation for the stock at a revised target price of RM5.28, implying a 35% potential upside.

“AirAsia’s financial year 2017 (FY17) and FY18 respective dividends of 6.2% and 3.9% are impressive, but this could likely be higher if our estimated 52.6% divestment of its leasing entity materialises,” Ahmad said.

He said despite projections of higher oil prices, earnings over the next two years are expected to improve on a stronger ringgit, as well as higher yields and loads.

“The recent reverse take- over of AirAsia Indonesia and upcoming initial public offering of AirAsia Philippines should also crystallise valuations,” he added.

Asia’s biggest low-cost airline recently completed a backdoor listing of its Indonesian arm, which has since been renamed to PT AirAsia Indonesia Tbk.

AirAsia also aims to raise US$250 million from its Philippine unit to fund more aircraft purchases and expand its route to cater to the extended boom in budget air travel.

It is said over the next 10 to 15 years, AirAsia Philippines would have 70 planes. New routes to Incheon, Korea, Bali, Jakarta and Japan are also expected in the near term.

For its third quarter ended ended Sept 30, 2017, Air Asia reported a 42.9% increase in earnings of RM505.32 million, while its revenue rose 45.1% from RM1.68 billion to RM2.44 billion in the same period last year on higher number of passengers carried.