AirAsia share holders eye high dividend

“Post-sale, gearing levels would fall, and the risks arising from the associate airlines would be shared with the new majority owner of AAC,” it said in a note.
“We expect 96 sen per share in special dividends to be declared post-Asia Aviation Capital’s disposal,” it said.
It has been reported that the airline was in the process of evaluating the proposed sale of AAC. Chief executive officer Tony Fernandes said AirAsia had appointed three banks to conduct the sale and there had been significant interest in AAC, with a ready offer in hand valued at about US$1 billion (Bt35 billion).
AAC is AirAsia’s wholly owned arm that leases aircraft to associate airlines in Thailand, Indonesia, the Philippines, India and Japan.
At the point of sale, AAC will have a portfolio of about 70 Airbus A320s, with aircraft and their associated debt novated from AirAsia.
CIMB Research said the best offer on the table so far valued AAC at $1 billion, although it believed that AirAsia was attempting to push the valuation even higher.
“The latter was calculated based on the market value of AAC’s expected portfolio of 70 aircraft, with the valuation boosted, in our view, by AirAsia’s large and attractively priced order book with Airbus, which AirAsia has promised to share with the future AAC owner,” it said.
The exact proportion of AAC to be sold has yet to be decided by AirAsia, but a buyer has offered to purchase an 80-per-cent stake for $800 million.
CIMB Research said AirAsia might sell a smaller stake if it could get a higher valuation.
“We suspect that the key criterion is the amount the two founders need to receive in special dividends to settle the 1 billion ringgit they would borrow to pay for the upcoming placement of 559 million new shares at 1.80 ringgit each,” it said.
The research house said that after the placement, the two founders would have a combined 32.4-per-cent stake in AirAsia.
“This means they will need AirAsia to pay at least 3.1 billion ringgit in special dividends (1 billion ringgit/32.4 per cent) to settle their loan.
“The $800-million proceeds from the potential sale of an 80-per-cent stake in AAC neatly matches the amount the founders need.
“This is the reason we think the entire proceeds will be paid as special dividends, representing 96 sen per share on enlarged post-placement base of 3.34 billion shares,” CIMB Research said.
The research house estimated that 1.5 billion to 1.7 billion ringgit in debts associated with the leasing business would be de-consolidated, reducing net gearing to below one time.
Also, the future funding of loss-making associates would be shared with the new AAC owner, since the associates will pay aircraft rents directly to AAC.