PETALING JAYA: AirAsia Group Bhd has obtained shareholders’ approval for the disposal of 25 aircraft to Castlelake LP for US$768 million (about RM3.2 billion), which will free up cash for the group’s digital business plans.
Almost 100% of its shareholders voted in favour of the deal, according to the carrier’s filing with the stock exchange.
AirAsia Group CEO Tan Sri Tony Fernandes declined to speak to the media at its EGM today.
However, he said in a tweet that the move will result in the group having more cash for its digital business, and enable it to be asset-light.
“Selling our aircraft monetises all our aircraft at high prices and avoids residual risk, and allows us to return cash to shareholders and invest in our new digital business,” he said on Twitter today.
“Between accountants and analysts, investors get a raw deal. MFRS 16 had no impact of cash. I value companies on cash generation. Even with that standard and if you use P&L (profit & loss) for analysis, the impact of the new standard MFRS 16… the impact is about RM35 million a year. Not very material,” he added.
The disposal will be done via the sale of the group’s entire equity interest in Merah Aviation Asset Holding Ltd, which is held by the group’s indirect wholly owned subsidiary Asia Aviation Capital Ltd (AACL), to AS Air Lease Holdings 5T DAC, an entity indirectly controlled by US-based investment firm Castlelake.
In addition to the sale of shares of Merah Aviation, Castlelake will also purchase from AACL a total of four new aircraft to be delivered this year, as announced by the group in December last year.
The 25 aircraft comprising A320-200ceo and A320neo under Merah Aviation, together with the four new aircraft to be delivered (A320-200ceo), will be leased back to AirAsia Bhd and/or its affiliates.
Fernandes said in a statement in December last year that the transaction is part of AirAsia’s ongoing transformation into “something more than an airline”.
“As we move towards becoming a travel technology company, the disposal of these aircraft will not only unlock significant value but also bring us closer to our goal of being a truly digital company.
“Years ago, many analysts criticised us for having high gearing and owning assets. Now many understand why we did that. In a few years, our digital strategy will be understood as well,” he said.
Meanwhile, AllianceDBS Research said AirAsia’s higher leasing expenses post disposal of assets will more than offset the factors contributing to its steady outlook this year, and has cut its FY19 and FY20 earnings projections by 15% and 19.4% respectively.
“We made adjustments to our earnings to account for leasing expenses which costs more than owning an aircraft. We have also adjusted our fleet expansion plans in line with management guidance for an additional 18 aircraft for FY19. This brings the group’s consolidated ASK (available seat kilometre) growth to 9.8%, 5.5% and 4.8% for FY19, FY20 and FY21 respectively,” it said in its report today.
It maintained its “hold” rating for the stock, with a lower target price of RM2.38 which includes a 13 sen special dividend from the Castlelake sale.
The research house said the group’s outlook remains steady as the market leader in the industry with 41.7% market share and expansion plans are underway with 18 new aircraft for FY19.
“ASK is expected to grow at 9.8% and RPK (revenue per kilometre) at 10.1% backed by load factors of 84.7%. Subdued fuel prices would help support earnings. Ancillary income would also grow as AirAsia ramps up REDCargo and AirAsia.com,” it said, noting that ancillary business contributed 20% to group revenue in FY18.
For the longer term, it favours the stock for exposure in the e-commerce business which could potentially benefit from the upcoming growth.
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PETALING JAYA: Berjaya Food Bhd (BFood) saw a net profit of RM8.98 million for the third quarter ended Jan 31 compared with a net loss of RM10.85 million a year ago, mainly due to higher profit contributions from its Starbucks operations in tandem with the higher revenue achieved as well as improved performance from the Kenny Rogers Roasters (KRR) Malaysia’s operations in the current quarter, with the absence of loss arising from the disposal of the group’s KRR operations in Indonesia.
It registered a 9.8% increase in revenue to RM180.54 million from RM164.44 million in the previous year’s corresponding quarter, mainly underpinned by the same-store-sales growth recorded by Starbucks as well as additional Starbucks cafes operating in Malaysia in the current quarter under review.
BFood has recommended a third interim dividend of 1.0 sen dividend per share for the quarter under review, payable on April 26.
For the nine-month period, BFood’s net profit jumped over 73 times to RM22.26 million from RM304,000 in the previous year’s corresponding period, while revenue rose 6% to RM508.50 million from RM479.61 million.
“The renewed consumer confidence level coupled with the group’s expansion plans will fuel the group’s business growth. This augurs well for the group’s operations going forward,” BFood said.
KUALA LUMPUR: PPB Group Bhd, a Malaysian diversified conglomerate, is allocating a sum of RM831 million for capital expenditure for the next four years for its expansion plans locally and internationally across all segments.
Managing director Lim Soon Huat said expansion plans include the addition of nine new cinemas locally and one in Cambodia for the period, as well as upgrading existing cinemas under the film exhibition and distribution segment for RM373 million.
“The group will also allocate RM401 million for the grains and agribusiness segment, which will be used for investment in China flour mills and the construction of a 500 tonnes per day flour mill in Vietnam as well as RM3 million for the property segment to continue upgrading our existing malls.
“For the consumer products segment, we are allocating RM16 million for the construction of a new production facility and purchase of plant, machinery and intangible assets, RM5 million for environmental engineering and utilities to purchase equipment and office renovation, as well as RM33 million for other segments to purchase plant and machinery,“ he told a media briefing today on the company’s outlook for this year.
Under the environmental engineering and utilities segment, he said the group has secured two water projects in Sarawak worth a total of RM88 million, and is tendering for projects in Peninsular Malaysia and Sarawak with a total value of RM350 million.
Lim said that all the tenders will be announced in stages with the latest expected to be announced in May this year.
“Going forward, the grains and agribusiness segment is expected to remain competitive on the back of a volatile commodity market and it will continue to focus on volume growth and maintaining the good quality standard of our products.
“The performance of the consumer product segment is expected to remain stable, supported by a widening product range and the introduction of new products into new markets,” he added.
The property division, he said, will focus on completing the Megah Rise project in Petaling Jaya while striving to maintain and improve the operational excellence of its existing mall and property management business.
For the financial year ended Dec 31, 2018, its grains and agribusiness segment’s revenue increased by 5% to RM3.15 billion on the back of higher sales from all flour mills.
Revenue from the film exhibition and distribution segment rose by 12% to RM538 million, due to the strong performance of Malay titles and contribution from cinemas opened in 2017.
The environmental engineering and utilities segment also recorded higher revenue of RM205 million for the year, up by 57% as compared to a year before, while the property segment’s revenue went up 11% to RM53 million.
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PETALING JAYA: Kossan Rubber Industries Bhd’s net profit for the fourth quarter (Q4) ended Dec 31, 2018 grew 29.64% to RM59.51 million from RM45.91 million a year ago attributable to improvements in all three divisions of gloves, technical rubber products (TRPs) and cleanroom.
The group recorded revenue of RM589.37 million, an increase of 23.36% as compared with RM477.77 million in Q4’17.
For the full-year period, Kossan’s net profit rose 10.28% to RM200.78 million from RM182.06 million a year ago.
The group also recorded its highest ever revenue, surpassing the RM2 billion mark to RM2.14 billion, an increase of 9.53% against RM1.96 billion in FY2017.
On its prospects, Kossan said the demand for the group’s glove products continues to be strong. Capacity for the group’s latest Plant 17 (1.5 billion pieces) has been fully taken up, with meaningful contributions expected in the coming quarter.
Construction works for Plant 18 (2.5 billion pieces) and Plant 19 (3 billion pieces) are currently on-track, with expected full commissioning by the second quarter of 2019 and fourth quarter of 2019 respectively.
Thereafter, the next phase of the group’s expansion will be centred in Bidor, Perak, which is currently in the planning stage. The project will commence in 2020 and will take eight years to complete.
Additionally, Kossan said landbank in Bestari Jaya and Kuala Langat provides added flexibility and sustainability to the group’s expansion plans.
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