Friday, 12 June 2015

AirAsia drops 10%, due to research report?

The share price of AirAsia dropped yesterday about 10%, back to its 2010 levels. According to The Star's article:

".... on concerns about the outbreak of the Middle East Respiratory Syndrome (MERS) and its impact on air travel but greater concerns could be about the weak ringgit.

AirAsia could also be hit by the depreciating ringgit as sizeable fixed costs are in US dollar while bulk of earnings are in ringgit, analysts said."

I received news from a reliable source that a research report from Gillem Tulloch of GMT research might (also) have to do with it.

I don't have the report, nor is it publicly available (behind paywall).

According to one broker (edited):

"The issue raised include the ability of Indonesia AirAsia (IAA) and AirAsia Philippines (AAP) to repay their debts of RM 2.8 Billion.

Tony strongly believes he can get back around one billion ringgit after he locks in new investors in both IAA and AAP. Within the next three months. The process is further ahead in the Philippines than in Indonesia. But until we see the one billion ringgit, there will always be concerns and risks that the deal could fall apart. All I have right now is Tony's word that things are progressing well.

... the longer-term issue is, whether AirAsia will be able to get IAA and AAP to be sustainably profitable.

With foreign shareholding >50%, it's vulnerable to a massive sell off. ".

The accounting issues are not new, I wrote for instance almost four years about the same (here).

We will see how this will pan out, when more details about the research report will be published, and AirAsia will react to that.

Hopefully in a more professional way than the previous time (here and here):

It looks like Paul Dewberry was right after all and Tony Fernandes could not prove him wrong.

To end this posting on a positive note, the board of directors of AirAsia X has suspended their wages for 2015, which is a great gesture. I hope other Bursa listed companies follow suit, when the need arises.

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