Friday, April 22, 2016

Airasia: So this cannot be right! (Updated)

As a shareholder this cannot be right especially if the founders is trying to get the minority shareholders to vote for the placement come 9 May 2016.

The founders are selling at around RM2.10, while picking up the shares en bloc at RM1.84. Trading is ok, but not in this manner, unless they do not want the placement to go through.

Shareholders should reject the placement with this happens.

Although it is mentioned that the shares is being sold by another director, Dato' Abdel Aziz, one beg the question why sell now rather than later...

Sunday, April 17, 2016

Airasia: Harder for founders to get private placements through?

Boo!!! So Tony Fernandes and partner did a dare and announced a placement to themselves and the minorities bought it. Now we think the shares of Airasia is not RM1.84 but higher. (You see investment besides fundamentals is a perception game in the short run)

It is a voting machine in the short run, but a weighing machine in the long run. (Airasia had that moment in the last 1 year, where it started with GMT)

Despite Bursa approving the placement, will it get pass the minorities hands? At today's price of RM2.13, it is after all 16.1% [(RM2.09-1.80)/RM1.80 - after dividend] premium over the price they supposed to purchase at - RM1.80.


The founders will not be able to vote and Airasia has a largely huge free float. Will all these shareholders vote for the placements - which I think needs a minimum >50% approval?

Now it seems a rights is a fairer option - but not necessarily a preferred option for the founders and short term shareholders.

But do remember, stock is a weighing machine in the long run!

Saturday, April 2, 2016

Airasia's cash injection: Anything positive? (Updated)

Plenty. It surprises me as people were talking about the founders having financial trouble so much so that it affects Airasia. Now they are pumping in RM1 billion - just to prove their commitment towards its cause. I have mentioned many times, Airasia is a growing company. Many puts it as being in a mature market. NOT RIGHT.

It needs more money. And it is not that the company is in financial difficulties. One can read many articles to proof that but do not read into rumors. The company is generating positive operating cashflow by quite a number, especially now. However, it may not be able to generate free cashflow due to the investments it needs to make.

The problem for Airasia is Asia. Asia is a fast growing market for low costs, so much so that the owner for Vietjet can be one of the richest in Vietnam. Airasia does not produce cashflow fast enough for it to not further raise funds.

I have written several articles on Wellington and EPF sales. They were selling between its price of around RM1.30 to RM1.60. If one is to just follow the funds actions, we would be following the sale ourselves. Now, the question is with EPF selling most of their stocks at around RM1.50 and now both the founders buying at RM1.80, who would you trust most? The quantum itself is huge. It is not that both Tony and Kamaruddin are buying 2% of Airasia. It is 16.7%.

Now, the only thing I have qualms about is that the founders are buying cheap - not too cheap but we expect them to buy cheap - although this can be a contentious debate. Remember, the founders are not expected to buy at above market value. The fact that they decide to buy at RM1.84, in my mind, means that the founders must have thought, it could go much higher. Things are going well for airlines. Oil price are low and seems to be continuously low, Ringgit seems to be improving which is good time for Airasia to buy more planes, MAS is pulling back allowing Airasia to take up position as the largest Malaysian airline and one of Airasia's biggest market - China, with its people having huge appetite to travel.

Why then if the private placement is good, Airasia does not do rights? I guess again people. If Airasia does rights, shareholders may complain that it is so much in trouble that it is asking for more money from shareholders. If it does private placement at market price (no discount), then TF and Kamaruddin are putting the money where their mouths are. For those who wants to participate, buy tomorrow - one may still be able to catch the stock at RM1.84 perhaps. For those who still fear and prefer a less turbulent stock, sell from the opening - tomorrow.

The other thing I like about this deal is that they do not do a private placement at discount to market price and to third parties whom we do not know about (sometimes to friendly parties or can be proxies). The placement price is close to its closing price before suspension and openly to the founders. This is transparency and allows me to appreciate at how Airasia treats its minority shareholders. They are doing the right thing.

With that, I just hope that the lost of confidence over Airasia will stop and it is time for a Malaysian company to grow aggressively regional and be the finest low costs airline in Asia.

Thursday, March 31, 2016

What would Tune Air do?

In case you do not know, Airasia has just announced calling for a suspension. Suspension could mean big news (such as M&A) or and could sometimes mean a small insignificant news.

What do I think? I don't know. However, this is what I think it would be mostly needed. Privatisation. (Even though a day before today, it announced that the rumor that it is contemplating a deal with China's Everbright Bank is not true.)

Why do I think that it needs to do a privatisation. Any company that is doing major corporate exercise and needs time to do it, it is best to go the privatisation route. Dell, Maxis and even the latest MAS and Tiger Airways went for that.

Airasia is in that mould. I have said before, it needs to expand to compete. The airline industry cannot wait for Airasia to grow at its own pace. It needs to expand fast enough to compete. If Airasia cannot become the largest low costs airline in India, it needs to be second to Indigo - not fourth or fifth. Similarly, Japan, Indonesia or any new country it is planning to expand its base from.

The problem being a public company is that shareholders (most of them) do not understand. They want good dividends, they want strong growth in profits, strong balance sheets, less debt etc. For Nestle, Dutch Lady it is possible.

Unfortunately, Airasia cannot deliver all of the above. Airasia, needs to go leverage, it needs to raise funds and needs to expand further. Indian and Philippines operations need more money. India needs more than 5 planes. To do this, private equity is better than public equity - on paper and many times it is true.

Public just could not understand.

If however, it is to do a rights issue or private placements, I will be disappointed. Why? Just too low based on its current price.