TransAsia Airways Corp (復興航空) shares yesterday extended their losses, falling another 10 percent, the daily limit, after the carrier on Tuesday announced that it is closing down due to massive losses.
However, shares of China Airlines Ltd (CAL, 中華航空) showed significant gains after the Executive Yuan asked the nation’s largest carrier to take over all domestic and overseas routes from TransAsia starting on Tuesday next week.
Buying in CAL shares spread to EVA Airways Corp (EVA, 長榮航空) on the hope that the two firms would expand their global service networks by assuming TransAsia’s overseas routes, analysts said.
TransAsia shares closed at NT$4.22 on the Taiwan Stock Exchange. CAL gained 8.35 percent to close at NT$10.25 after breaching the psychological NT$10 level in the morning session and EVA shares rose 1.6 percent to close at NT$15.85.
The TAIEX was down 0.28 percent at 9,152.11 points for the day.
“The broader market remained in consolidation mode, so investors tended to look for individual stocks, like CAL, which had positive leads,” Hua Nan Securities Co (華南永昌證券) analyst Henry Miao (苗台生) said.
“Many investors hope that CAL will rake in more profit from its
Taipei-Shanghai flights after it assumes TransAsia’s overseas services, which is why investors parked their funds in the stock throughout the session,” Miao said.
TransAsia used to fly to a dozen destinations in China, including Shanghai, Hangzhou, Fuzhou, Xiamen, Chongqing, Wuhan, Wuxi and Changsha.
The Taipei-Shanghai route is dubbed the “golden route,” as it commands a higher load factor for carriers on the back of higher number of business travelers.
As for TransAsia, “selling remained heavy after its shares were downgraded to the category of a ‘full delivery’ stock by the stock exchange regulator. There are no signs as to when the selling will stop,” Miao said.
According to regulations, investors are required to make sufficient deposits in their stock trading accounts before placing orders to trade full delivery stocks, such as TransAsia, that face financial difficulties.
In the first nine months of the year, TransAsia posted a net loss of NT$2.22 billion (US$68.91 million), or losses per share of NT$3.42.
The carrier’s gross margin stood at minus-18.76 percent in the same period.
In addition to the losses, TransAsia shouldered about NT$11 billion in debt, of which Mega International Commercial Bank (兆豐銀行) is the largest creditor with a loan of NT$1.7 billion.
Shares of Mega Bank’s parent company, Mega Financial Holding Co (兆豐金控), closed up 1.53 percent at NT$23.2.
If the bank’s loans to TransAsia were classified as non-performing loans (NPLs), its pro forma NPLs would reach NT$3.6 billion, compared with NT$1.96 billion at the end of last month, with pro forma NPL ratio at 0.2 percent, HSBC Securities Taiwan Corp analyst Anthony Lam (林天恩) said in a note on Tuesday.
If Mega Bank writes off the loans, it would lead to a 9 basis point rise in its credit costs and a 6 percent hit to its earnings this year, Lam said in the note.
Additional reporting by Ted Chen
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