Shares of TransAsia Airways Corp (復興航空), a local mid-sized international carrier, rose by the daily limit yesterday on hopes that the airline will introduce a strategic investor through a stake disposal by one of its major shareholders, dealers said.
In addition, with international crude oil prices on the decline, many investors expect lower operating costs in the air travel sector and an improvement in airlines’ bottom line, they said.
Shares of TransAsia rose by the daily maximum of 7 percent to close at NT$14.25, with 1.69 million shares changing hands, the Taiwan Stock Exchange’s data showed.
Last week, China Development Industrial Bank (中華開發工銀) filed an application with the stock exchange to cut its holdings in TransAsia, but said it was in talks with a certain buyer.
“So, there have been hopes that TransAsia will introduce a strategic investor to improve its operations and boost its profitability at a time when the global airline business is struggling in a slow economy,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said.
“As the broader market has gone into consolidation mode after yesterday’s 1.91 percent plunge, investors are targeting stocks like TransAsia that have positive leads,” Hsu said.
In its stock exchange filing, China Development Industrial Bank said it is planning to sell 20 million TransAsia shares, or about a 3.61 percent stake in the carrier. The bank owns a 13.4 percent stake in the airline.
The shareholder said the disposal is simply part of its strategy to strengthen its financial structure.
Since major local airlines, including TransAsia, reported a net loss for the first quarter of this year, the sector has been faced with downward pressure in recent sessions, according to Hsu.
“TransAsia shares staged a strong technical rebound this morning on the back of the strategic alliance leads, which has left the first-quarter losses behind for the moment,” Hsu said.
“Other airlines’ stocks are also moving higher on bargain hunting buying,” he added.
Shares of China Airlines Ltd (中華航空, CAL), the nation’s largest air carrier, rose 2.58 percent to NT$11.95 yesterday, while shares of EVA Airways Corp (EVA, 長榮航空), the nation’s second-largest carrier, climbed 2.29 percent to NT$17.85.
For the January-to-March period, TransAsia reported a NT$0.23 loss per share, while CAL and EVA posted losses per share of NT$0.21 and NT$0.28 respectively.
“The ugly first-quarter results largely reflected weak global demand, which affected air cargo transportation, but their bottom lines could improve on the back of stable international crude oil prices,” Hsu said.
West Texas Intermediate crude for July delivery fell US$0.03 to US$94.25 per barrel in New York overnight, while Brent crude for July contracts dropped US$0.16 to US$102.44 in London.