PETALING JAYA: CIMB Research, which is maintaining its Add call on AirAsia Bhd, expects the low cost carrier to finalise the price of the sale of its leasing arm Asia Aviation Capital Ltd (AAC) by end of next month. 

The research house said AirAsia is making progress towards negotiating a final price for the AAC sale, and expect it to make an announcement around end-August. 

“The guidance for a valuation of some US$1bil for the entire AAC remains unchanged, and a sale of some 70-80% stake will raise proceeds of around RM1 per share. 

“We have imputed a special dividend of RM1.12 into our target price on the basis of a US$1.2bil valuation and a 70% stake sale,’’ it noted.

The brokerage is also of the view that the incorporation of the new wholly-owned subsidiary, Malaysia AirAsia (MAA), could pave the way for a separate listing of MAA. 

The new unit will house the Malaysian airline business that is currently embedded within AirAsia.  

“Assuming a 30% stake sale at 12x P/E on sustainable earnings of RM800mil per annum (ex-leasing profits), AirAsia can realise cash proceeds of 86 sen/share, due to accretion from the current group valuation of around 10x P/E, which will likely be paid as special dividends after the MAA listing,” it said. 

CIMB Research views the impending sale of AAE Travel Pte Ltd and Asia Aviation Centre of Excellence (AACE) could be worth 21 sen/share and the proceeds will be distributed as special dividends, in our view, probably early next year.

AirAsia has a 25% interest in AAE Travel, which was valued at US$86mil when the first 25% tranche was sold in 2015. The balance will probably be sold this year at a higher valuation to joint venture (JV) partner, Expedia. 

AirAsia’s 50% stake in the pilot training school, AACE, will also be sold this year to JV partner CAE for an estimated US$81mil. 

On the revenue front, AirAsia is working towards enhancing its IT system in order to price ancillary products on a discriminatory basis. 

For instance, lowering the price of Hot Seats on less popular flights, but raising them for morning and evening departures, pricing meals according to the time of the day to encourage take-up during non-meal times, and to extract higher value during breakfast, lunch or dinner times, etc. 

AirAsia will also try to cut unit costs by raising aircraft utilisation, and reduce discretionary costs.

Read more at http://www.thestar.com.my/business/business-news/2017/07/28/leasing-unit-price-to-be-finalise-next-month/