AirAsia Bhd, Asia’s biggest low-cost airline, values its wholly owned leasing arm at 4.1 billion ringgit ($1 billion), and aims to attract an equity investor to the unit by end-2016, it said in a presentation to analysts. The Malaysian airline aims for its Asia Aviation Capital (AAC) to expand its portfolio to about 200 aircraft in five years from the current 55, AirAsia told analysts in the Aug. 15 presentation, a copy of which was obtained by Reuters.
Group Chief Executive Tony Fernandes, AirAsia CEO Aireen Omar and other senior officials highlighted the company’s plans at a briefing for analysts last week.
AirAsia had no immediate response to Reuters’ request for comment on the presentation. Earlier this month, Reuters reported that AirAsia was looking to sell a majority stake in AAC and could value the business at about $1 billion, significant for a company that currently has a total market value of $1.9 billion.
A successful deal will help Fernandes, one of Asia’s best-known entrepreneurs, who has grown AirAsia from a two-plane operation a decade ago, to bolster the airline’s finances and cut debt.
Reuters reported that AirAsia plans to tap potential suitors including the leasing units of China’s HNA Group, China Merchants Bank, and the aviation leasing company backed by Hong Kong billionaire Li Ka-shing. AirAsia group, which includes affiliates in Thailand, Philippines, India and Indonesia, is recovering from a rough patch after the crash of an Airbus jet in Indonesia in late 2014 hit demand, and an attack on its accounting practices by GMT Research pushed its shares to seven-year lows in August 2015.
Ngoi Se Chai, partner at Oaklands Path Capital Management, which owns shares in AirAsia, said the airline’s cost advantage could help it grow for the next few years if it does not increase its fleet size too quickly. In the presentation, AirAsia said the fair value of the company’s stock should be at least 6 ringgit a share after including the market value of AirAsia, AAC and stakes in other businesses such as its long-haul affiliate AirAxia X Bhd and loyalty programme joint venture.
AirAsia’s share price closed at 2.86 ringgit on Thursday, versus Monday’s closing price of 2.99 ringgit. The shares, which rose to a 3-year high of 3.33 ringgit last week, have more than doubled so far this year. Estimates for AirAsia’s 2016 net income have risen by an average of 59 percent based on five analysts who have made revisions over the past 30 days, Thomson Reuters data shows. ($1 = 4.0180 ringgit)