A woman walks past an advert for Malaysian-owned airline AirAsia in Kuala Lumpur. - AFP
KUALA LUMPUR: AirAsia Bhd's share price rose to a high of RM3.29 in early Tuesday trade on analysts expectations of total special dividend per share (DPS) of RM1.27 following the latest corporate exercise with Singapore's SATS Ground Services Pte Ltd.
At 10.13am, it was up 11 sen to RM3.29 in active trade.
The FBM KLCI rose 1.66 points or 0.09% to 1,750.01. Turnover was 984.14 million shares valued at RM350.02mil. There were 275 gainers, 284 losers and 339 counters unchanged.
CIMB Equities Research raised its target price to RM3.67, adding a special DPS of 11 sen arising from the sale of Ground Team Red Sdn Bhd (GTRM), taking the expected total special DPS to RM1.27.
On Monday, the low-cost carrier entered into a 50:50 joint venture with SATS to operate its ground handling business in Malaysia, as well as the ground handling business of Changi Airport Terminal 4.
GTRM was a former unit of AirAsia while the latter is a unit of SATS under SATS Ground Services Pte Ltd, aka ‘SGS Singapore’ (SGSS).
CIMB Research said the transaction was expected to be completed by end-November 2017, and will result in AirAsia booking an exceptional one-off gain of RM365.7mil and receiving cash proceeds of RM372.2mil (11 sen a share).
“We are raising our target price to RM3.67, adding a special DPS of 11 sen arising from the sale of GTRM, taking the expected total special DPS to RM1.27.
“The core earnings of the AirAsia group have been valued at nine times CY18F P/E, which is low relative to the low-cost carrier sector average of 15 times,” it said.
Recall that on Aug 25, AirAsia announced the proposed sale of its 50% interest in AACOE (pilot and crew training school) to CAE for US$100mil (13 sen a share), with RM304.8mil in one-off gain, also expected to be completed by end-November.
AirAsia is still negotiating the sale of around a 70% stake in AAC, at a whole-company valuation of some US$1bil, and also a sale of its remaining 25% interest in AAE Travel for around US$100m, in CIMB Research's estimate. The latter two are worth RM1.03 a share, if the entire proceeds are paid out as dividends.
We are positive on AirAsia’s JV with SATS, as AirAsia will gain exposure to the ground handling operations of Changi Terminal 4, which currently serves six airlines, i.e. Cathay Pacific, Cebu Pacific, Vietnam Airlines, Korean Air, Spring Airlines, and AirAsia itself.
“Also, SATS may be able to help grow GTRM’s third-party business, and improve its cost and operating efficiencies. SATS’s catering operations are not part of the JV with AirAsia," it said.
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