Maybank “Neutral” on AirAsia Privatization News

28th Mar 2016

This weekend, news that Malaysian-based budget carrier AirAsia Bhd could be privatized hit the Internet. According to reports, AirAsia’s founder Tune Air is planning a partnership with China Everbright to privatize the carrier. However, those reports may not be true after all.

One group that remains skeptical regarding AirAsia’s privatization is Maybank Investment Bank Research. MIBR said it is “neutral” on the matter and has also downgraded AirAsia’s stock from “buy” to “hold”.

MIRB said the following about AirAsia’s possible privatization:

We are neutral on this event pending details. We now rate AirAsia as a ‘hold’ (previously ‘buy’) as the current share price, which has outperformed, offers limited upside to our unchanged target price of RM1.80, which is pegged to one time 2016 P/BV.

Not the First Time AirAsia is being “Privatized”

Furthermore, according to Maybank, this is not the first time news of “imminent” AirAsia privatization has surfaced:

 By our count, there was at least five such ‘attempts; and this latest one makes it six. However, there was never a formal offer made to AirAsia for a privatization, thus inferring that it was not as ‘imminent’ as the market would have thought.

According to MIRB, it is unlikely that privatization will happen this time as well. In December last year, for example, the airline had called for an Extraordinary General Meeting (EGM), which was viewed at the time as a sure sign that privatization is at AirAsia’s door. However, as it turned out, this was done only to secure shareholder’s mandate to buy back 10 per cent of the company’s shares. By doing this, AirAsia sent a clear message that it is not for sale.

The company made its first buy back tranche not long after announcing the fourth quarter results for 2015 in February.

This maiden buy back proves that the management is making good on its ‘not for sale’ declaration. Furthermore, Tune airline has not accumulated shares in AirAsia for the past 12 months, according to fillings to the Malaysian stock exchange. And if China Everbright has, the stake will be less than 5 per cent, which does not require filling to the exchange.

AirAsia declined to comment on the possible privatization, saying only it has not received any formal offers.

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