Saturday 20 June 2015

GMT on AirAsia: "New Dog, Old Tricks"

On Vimeo a video is released giving some (but not all) of the issues that GMT Research has raised on AirAsia.

The video can be found here.

It is reasonably detailed and I recommend the viewer to pause the image when numbers are being shown.

Tony Fernandes has immediately described the report as "rubbish", and that he will proof the writers of the report wrong. Not an unexpected reaction.

However, what is needed is a more sophisticated reaction, not the kind of reaction from Nobel (listed in Singapore).

Airasia has announced a pretty decent reply a few days ago, however, there are some shortcomings.

First of all it prides it self on transparency, but good transparency is something else than good governance or good accounting.

For good governance for instance a neat corporate structure is needed, something AirAsia (and its mother company) doesn't have. The amount of related party transaction between the many parties (each with different shareholders) is simply overwhelming.

Regarding the good accounting: AirAsia has always accounted very aggressively, in my opinion much too aggressively, and in AirAsia X's case to an extent that is doesn't make sense at all (deferred tax when it continues to make losses).

Regarding the first part (the consolidation has just not been possible), surely it could have been presented in some form or shape in the year report, what the consequences would be of consolidating.

Good however that from the second quarter onwards the company will include the numbers.

For me, AirAsia has always relied much too much on a combination of financial engineering and marketing hyphe, something I don't like at all.

This report by GMT is a refreshing, different approach from the usual stuff we normally read in the Malaysian media.

Who will be right at the end of the day? I guess we have to wait and see.

AirAsia is however warned, and could thus take appropriate actions, for instance by raising more capital.

Another unrelated but interesting video by GMT can be found here, some of its contents:

  • WorldCom & Enron explained
  • Goodwill & impairments
  • CP ALL: A very over-leveraged buyout
  • Youku: Growth through acquisitions
  • Curious Assets
  • Wilmar: Leveraged Chinese carry trade
  • Reliance Infrastructure: Capitalising expenses?
  • Chinese Concessionaires: Paper profits
  • P&G H&H: Corporate governance
  • Larsen & Toubro: Cutting off the lifeline

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