AirAsia; Hold
Price Target: RM2.90; AIRA MK

AirAsia converted its holdings of 42.7m Redeemable Convertible Preference Shares (RCPS; RM1.00 each) in AirAsia X (AAX) into 42.7m ordinary shares without consideration. Upon the conversion, AirAsia will own 18.35% equity interest in AAX. AAX issued the RCPS to AirAsia on 29 October 2007 and 9 July 2010 for cash at par. This is ahead of the planned listing of AAX.

The listing is positive allowing the Group to unlock value at AAX and make it easier for AirAsia investors to value the investment in AAX. Although there could be upside to our target price from the listing, the upside is capped by AirAsia’s 18.35% stake in AAX. For now, we maintain our HOLD recommendation on AirAsia with a RM2.90 target price.

Source: HwangDBS Research - 13 May 2013