AirAsia – The Pride of Malaysia
We’ve really got a gem of a company to be proud of right here in Malaysia. AirAsia has been voted World’s Best Low-Cost Airline for 8 years running and the company is dominating the skies with their exceptionally low fares and unmatched talent displayed by the management.
How it all started
Established in 1993, AirAsia was founded first by DRB-Hicom. You’ve all heard the tale of how Tony Fernandes purchased the airline for RM1. Here’s how it happened: On 2 December 2001, the almost bankrupt airline was purchased for a token sum of RM1 WITH RM40 million worth of debts. Within just one year, Fernandes managed to turn the company around, producing a profit in 2002.
With all sorts of promotional fares, some as low as RM1, AirAsia managed to eat into former monopoly airline MAS. Malaysia Airlines will eventually decline to the point where they delisted from the KLSE. Fast forward to 2008, the company added a whopping 106 new routes to its list of 60. As they say, the rest is history. AirAsia is now an RM10 billion company with huge, HUGE growth potential.
AirAsia Annual Report 2016
The airline reported an RM6.846 billion revenue and RM2 billion profit after tax in 2016. Shareholders’ equity also increased to RM6.628 billion. The company has also significantly reduced its net debt to just under the RM8 billion mark. This is an immense sum but it is typical in the airline industry.
Another key factor is the airline’s growth in passengers and it’s capacity every single year, maxing out at a total of 26 million passengers and a 30 million capacity in 2016.
AirAsia has one of the most interesting and engaging annual reports out there. Give it a read: AirAsia Annual Report 2016
AirAsia’s Special Dividend?
[UPDATE] 23 February 2017 – RM2.70
There has been a frenzy over AirAsia the past few days due to the potential special dividend that will be declared.
Market experts predict the special dividend to range from RM0.50 to RM1.10 per share. The most recent information is that it could be as high as RM1.50 per share. That’s a 50% dividend yield based on the current market price. The one-time special dividend comes from the sale of an 80% stake in Asia Aviation Capital (AAC) which is said to garner a valuation of at least RM3.5 billion.
Want more good news? With my analysis, and excluding this special dividend, AirAsia underlying value is roughly RM2.90 per share. Another food for thought, as of last month, CEO Tony Fernandes and Kamarudin Meranun have both raised their combined stake of 32.3% in the company which was largely funded by loans. I believe they will declare a large amount in the form of special dividends which would enable them to settle the aforementioned loans.
That being said, there are of course the ever hovering external risks associated with airlines ie. jet fuel prices and airport charges. Let’s not forget our weak Ringgit and the competition from MAS and Malindo.
AirAsia to Establish LCC in China
[UPDATE] 15 May 2017 – RM3.40
AirAsia Bhd has signed a memorandum of understanding (MoU) with China Everbright Group and Henan Government Working Group to establish a low-cost carrier (LCC) in China.
It outlines how the parties will incorporate a joint-venture to be known as AirAsia (China) for the purposes of operating a low-cost aviation business based in Zhengzhou, the capital of Henan province in central China.
In addition, AirAsia (China) will invest in aviation infrastructure, including a dedicated LCC terminal at Zhengzhou airport and an aviation academy to train pilots, crew and engineers, as well as maintenance, repair and overhaul (MRO) facilities to service aircraft.
The MoU was exchanged between AirAsia Group Chief Executive Officer, Tan Sri Tony Fernandes, Everbright Financial Investment Holding Executive Director and President, Wang Weifeng and Henan Airport Group General Manager, Li Weidong at China World Hotel here on Sunday.
The ceremony was witnessed by Prime Minister Datuk Seri Najib Tun Razak who is on a five-day working visit to China.
AirAsia was the first foreign LCC to enter China and has carried more than 40 million guests since its inaugural route to China in April 2005. AirAsia and AirAsia X currently fly to 15 destinations in China and is the largest foreign LCC operating into the country.
This is huge news for AirAsia and will translate to a big slice of the pie in China’s aviation market for the company if the deal materializes. China has 1.37 billion vs Malaysia’s 30 million. Malaysia is only 2% of China. Think of the possibilities!
With this latest piece of good news, I’m pretty sure the counter will go past the RM3.50 per share mark. Please be aware that the deal has yet to materialize and even if it does, it’ll be a few years before it adds to the company’s bottom line. But again! Think of the possibilities and growth potential AirAsia has. We’ve conquered ASEAN and we’re establishing ourselves and gaining a strong foothold in the world’s most populous nation.
AirAsia is looking to become one of THE long term stocks to hold on to.
AirAsia’s Special Dividends
[UPDATE] 29 August 2019 – RM1.75
Tony Fernandes and gang have so far declared and paid out two rounds of special dividends during my tenure so far as an AirAsia shareholder.
Round 1 – 28 December 2018
The first round was back in December 2018.
The company declared a 40 sen dividend per share and I received a total of RM5,320 in dividend income then.
Round 2 – 29 August 2019
This year, AirAsia again declared 90 sen in dividend per share. Giving me a total of RM11,970.
Total AirAsia Special Dividends
In total, I’ve received RM17,290 in special dividends from the airline.
Total dividends received – RM22,462.00
Gross Investment – RM41,481.37
That’s about 54% of my capital back in my pocket in dividends alone. The average bought price for me, however, is at RM3.1189, today it is at RM1.75. That’s a 43% drop.
In pure numbers, AirAsia is still positive in the Freedom Fund.
Can’t wait to see where the budget airline goes from here. I am especially excited about its role in the logistics industry.
As always, invest at your own risk.