Saturday 15 October 2011

Probe on AirAsia, MAS share price trends

Above is the graph of the share price of AirAsia and Malaysian Airlines System (MAS), the vertical line represents August 5, 2011, just before the announcement of the share swap between AirAsia's parent and Khazanah Nasional.

The starting point on the left is April 19, 2011, with AirAsia's share price on RM 2.61 and MAS on RM 1.81.

On August 5, 2011 the price of AirAsia was RM 3.95 (+51%) and the price of MAS was RM 1.60 (-12%).

On August 12, 2011 AirAsia's share price fell to RM 3.45 (-13%) since the announcement while MAS share price went up to RM 1.87 (+17%).

The prices of the shares of both companies before the announcement of the deal are significant, since they were used to price the share swap.

These are multi billion RM companies, if there was indeed insider trading or any other suspicious trade going on, evidence should not be difficult to gather, the amounts of shares involved would be massive.

I am hoping for a speedy probe by the authorities with transparant reporting back to the investment community. The movements of the share prices before and after the announcement do indeed look suspicious, the volume traded was also much higher than normal.

From a Corporate Governance point of view, the fact that the two key people behind AirAsia suddenly become Director and major shareholder in the largest competitor is very worrisome. I simply fail to see how they can avoid conflict of interest situations or how they can act in the best interests of both companies at the same time.

The Securities Commission (SC) and Bursa Malaysia Securities will investigate the change in trend in the share prices of AirAsia Bhd and Malaysia Airlines following the suspension of trade on both the counters on August 9.

Prime Minister Datuk Seri Najib Tun Razak, who is also Finance Minister, said the SC and Bursa Malaysia will be studying the matter.

The SC and Bursa Malaysia will also monitor closely the share price movements from time to time including any unusual activity in terms of price and trade volume, he said.

Najib said this in his written reply to a question from Wee Choo Keong (Independent-Wangsa Maju) who wanted to know if the SC and Bursa Malaysia were aware that the share price of AirAsia had been on an uptrend and that of MAS was on a downtrend before the suspension of share trade on August 9.

Wee also sought an explanation on why the share price of AirAsia started to rise from July 20, 2011 on an unprecedented trend till the date of the share suspension with its share closing at RM3.95 sen while MAS closed its share at RM1.60 sen.

This trend however reversed later with the share price of AirAsia going down and the share price of MAS going up, Wee said.--Bernama

By Liau Y-Sing
KUALA LUMPUR, Aug 8 (Reuters) - Malaysian Airline System (MAS) and rival AirAsia are planning a share swap that would give AirAsia's parent a 20 percent stake in Malaysia's national airline, a source with direct knowledge of the deal said on Monday.

Under the deal, Malaysia's state investment arm, Khazanah Nasional, which currently owns close to 70 percent of MAS, would take a 10 percent stake in AirAsia, said the source who asked not to be identified because the deal has not been announced.

"This will help to improve synergies between the two," the source said. "They have been competing unnecessarily in the past and they will now pool their resources together."

AmResearch in Kuala Lumpur said in a note on Monday that the share swap could position MAS as a premium, long-haul carrier, while AirAsia takes on the domestic, short-haul network.

The share swap is expected to aid MAS, which has struggled to stay profitable, although it would be the second time in 10 years that the national carrier is being restructured to help its bottom line, analysts said.
AirAsia's chief executive, Tony Fernandes, and his deputy Kamarudin Meranun, will sit on the board of MAS after the restructuring, the source said, adding that CIMB is the deal's adviser.

Officials at MAS and Khazanah Nasional were not immediately available for comment. AirAsia officials said the airline would make a statement within a day or two.

The two airlines halted trading in their shares until Tuesday, saying separately they need time to prepare an announcement relating to "a material transaction."

Khazanah Nasional and AirAsia shareholders had denied on Sunday reports that Air
Asia's shareholders will emerge as the largest owners of national carrier MAS shares.

The global aviation sector has been hit by rising fuel prices and economic instability, but MAS and AirAsia have adopted different strategies to deal with the challenges.

MAS managing director Azmil Zahruddin told Reuters in March that the airline was prepared for a stronger future, although the Japan earthquake in March posed a challenge.

In May, MAS posted a first quarter net loss of 242.3 million ringgit ($80.4 million) compared to a profit of 310.6 million ringgit a year earlier, after a decent FY2010 that saw its net profit surpass expectations of a net loss.

In 2001, the authorities bailed out the then loss-making MAS with about $472 million of state money, drawing fierce criticism from investors who painted the deal as government interference in the market.
"AirAsia was set up to liberalise Malaysian skies, but with this partnership, I see us going back to monopolies," said another aviation analyst with a local bank. "At the end of the day, it's the consumers who will suffer as monopolies usually mean higher airfares."

AirAsia recorded a net profit of 171.9 million ringgit in the first quarter, down almost 25 percent from a year earlier. It is on a regional expansion drive, with a source saying it had recently drawn up plans to buy an extra 100 Airbus A320neo jets, potentially taking a record-breaking order to 300.

The budget carrier plans initial public offerings in Bangkok and Indonesia as it capitalises on demand in the region for cheap air travel.

AirAsia shares last traded at 3.95 ringgit before they were suspended, up 56 percent since the start of the year, while MAS' stock was last traded at 1.60 ringgit, down 23 percent so far this year. The overall index has fallen 2.4 percent since the start of the year.


  1. Thank you for the great job you are doing. Do you think the investment bankers, directors, etc are insider trading?

  2. Thanks for your complement.

    I honestly have no idea, only thing is, if something was going on (and on the outset of it, it does look suspicious), then it was huge, these are not thinly traded penny stocks, you need deep pockets to move these counters.