(AIRA MK/HOLD/RM3.07/Target: RM3.10)

Much of the recent gain in stock price appears to be due to the street’s expectation of a special dividend from the divestment of AACL. If AACL is indeed transacted at US$900m, proceeds for shareholders could be limited to RM0.17/share, assuming an 80% divestment. While theoretically AirAsia could opt for a higher dividend payout, it will be simply be a return of capital. That said, we view the divestment of AACL as positive from a risk management perspective. Downgrade to HOLD with target price unchanged of RM3.10. We will be buyers close to RM2.80.

Source: UOB Kay Hian Research - 30 Mar 2017