09 July 2013

"X"pensive AirAsia X IPO ?

Slate for its debut trading tomorrow (10th July 2013), can AirAsia X follows the footsteps of its sister company AirAsia? What would happen tomorrow pretty much depends on the fair value given by various research houses.

AirAsia X is a leading long haul low cost carrier since operating on Nov 2007, primarily in the Asia Pacific region. Currently, it serves 14 destinations acorss Asia, Australia and the Middle East, with 11 A330-300 planes.

Investment analysis:

  1. Benefits from synergies as part of AirAsia group
  2. Strong brand name
  3. Operate in the fast growing aviation market in the world
  4. Lowest unit cost base in the region
  5. Strong ancillary income at RM141/pax and expected to grow further

How about the risks?

  1. High jet fuel price
  2. World crisis i.e. war, terrorism, epidemic outbreak
  3. Slowdown in world economy
  4. Emergence of other long-haul LCCs
  5. Delaying of KLIA2 which may hamper its growth prospects
  6. Strengthening of USD against MYR, because 79% of its debt is denominated in USD

So, what's the fair value?
Either Rm1.40 or Rm1.20 given. Seems like this is not an exciting IPO for investors. Anyway, tomorrow debut most likely will remain in positive territory because there is a "king card" in hand. Yes. Maybank Investment Bank will be the stabilizing manager who can purchase up to 15% of the total number of shares offered under the IPO. No worry.

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