(AIRA MK/HOLD/RM3.28/Target: RM3.10)

Any special dividend from the divestment of AACL is unlikely to lead to substantial gains for shareholders. We estimate that proceeds to equity holders could amount to just RM0.10-0.13/share on a US$950m enterprise sale, but could rise towards RM0.60/share if AirAsia pays out AACL’s entire firm value. However, this would essentially be a return of capital to shareholders. That said, valuation is not excessive at 1.2x 2017F P/B given core ROEs of 28% and 17% in 2016-17 respectively. We suggest investors await better entry levels closer to RM2.80. Maintain HOLD. Target price: RM3.10.

Source: UOB Kay Hian Research - 25 Jul 2017