AirAsia Bhd’s shares skidded as much as 13 percent yesterday as investors, spooked by a report questioning the Malaysian budget carrier’s accounting, remained unconvinced by chief executive Tony Fernandes’ confidence that his firm can raise cash readily and has no need for recapitalization.
By 2:45pm, the stock had trimmed losses, but was still down 7.9 percent, giving Asia’s biggest low-cost airline a market value of 4.6 billion ringgit (US$1.23 billion). The shares have dropped nearly 30 percent, to five-year lows, since the report on Wednesday last week by little-known firm GMT Research first startled shareholders.
The slide came after Fernandes responded to concerns about AirAsia’s operations while attending the Paris Airshow, without referring directly to the GMT report, which said the carrier used transactions with associate companies to boost earnings.
Photo: Reuters
“We have so many cash-raising opportunities from our fleet, our investments, from our national cash operations, there is no need for a capital raise,” Fernandes said on the sidelines of the show.
On Monday, Fernandes wrote to investors saying AirAsia plans to raise as much as US$300 million from convertible bond issues at loss-making associates in Indonesia and the Philippines, and would sell and lease back up to 20 planes.
“The concern is whether they can execute the fund-raising. Until they announce something on this, the stock will remain weak,” said Alliance DBS Research analyst Kee Hoong Tan, who has a “Hold” recommendation on the stock.
AirAsia would have to inject more of its own funds if it fails to find third-party investors and this would be a strain on its balance sheet, he said.
In a stock exchange filing yesterday afternoon, AirAsia made its first official comment on the slide in its stock, without referring directly to the GMT report.
“Due to the recent movement in AirAsia Bhd’s share price, the management would like to assure the investment community that the company has a solid footing, strong balance sheet, rich in assets and good business outlook,” it said.
The firm said AirAsia’s accounts are transparent and prepared in accordance with international and local accounting standards. It said its Indonesian affiliate would meet payments due for lease, brand and license fees due to AirAsia from the current quarter.
Shares were little changed after the filing and bankers were skeptical about the fund-raising plans.
“We don’t see how the convertible bonds are going to get done. How can investors have the confidence to put money in the loss-making units?” one transportation banker at a US bank said, speaking on condition of anonymity.
Speaking in Paris before yesterday’s share slide, Fernandes said AirAsia, which owns 128 aircraft and picked up a series of airline awards on Tuesday, could easily raise US$1 billion in sale and lease-back deals, plus had investments worth US$500 million.
“We don’t want to do too many because we don’t need that much cash, but it’s just to show the market that it can be done and crystallize the value,” Fernandes said. “We’re a solid company with a solid balance sheet and a solid business plan.”
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