AirAsia defends accounting practices as share price continues to slide

PETALING JAYA: In a move to halt the continued slide of its share price, AirAsia Bhd has come out to defend its accounting practices in a four-page release to Bursa Malaysia, which also reveals that it values its Philippines and Thailand associates at US$600 million (RM2.26 billion) and US$700 million (RM2.63 billion) respectively.
AirAsia's share price closed 6.71% lower at RM1.53 yesterday with some 170 million shares traded.The stock has seen about RM800 million of its market cap wiped out since last Thursday, on heavy selling. AirAsia, followed by AirAsia X Bhd, were the most actively traded stocks on the bourse yesterday.
In a statement on its website, GMT Research said it released a report questioning AirAsia's accounting, profit generation, cash-flow issues, leverage and group structure to its paid subscribers on June 10. The report is on press embargo until June 24.
"We are in discussions with the company on our concerns," GMT Research said.
Just days after its group CEO Tan Sri Tony Fernandes said that it would be raising US$300 million through a bonds issuance, the low cost carrier outlined plans to raise share capital to around US$100 million for Indonesia AirAsia (IAA) and Philippines AirAsia (PAA) from US$13.81 million and US$13.28 million respectively; raising a minimum of US$100 million from new investors who will subscribe to convertible bonds issued by IAA and PAA respectively; and floating 20% of IAA and PAA shares to raise a minimum of US$150 million.
In the statement, AirAsia maintained that it has been transparent on its accounts, the revenue which will be generated from the aircraft leasing business and the reason behind the on-consolidation of its associates accounts.
"AirAsia's cash flow continues to strengthen due to capacity reductions taken last year, improved demand especially with the recovery in Chinese traffic, and a much more rational marketplace in all our territories especially Malaysia," its aid in the statement.
It also said that management's roadshows and the latest earnings briefing, have outlined various strategies to manage gearing level, which includes growing cash further through operations, capacity management, monetising non-core investments if valuation is right and recovery of debt from IAA and PAA.
It said it is confident of bringing down its net gearing level at 2.47 times now to 2 times by the end of 2015.