AirAsia to revamp corporate structure, reports lower Q2 net profit on deferred taxation

PETALING JAYA: AirAsia Bhd (AAB), which reported a 73% fall in second-quarter earnings, yesterday announced two corporate exercises – the transfer of its listing to a new investment holding company and the conversion of its perpetual securities investments in PT Indonesia AirAsia (IAA) into Indonesia-listed PT Rimau Multi Putra Pratama TBK (RMPP) new shares.
The carrier told Bursa Malaysia that under the proposed share exchange exercise, all AAB shareholders will exchange their shares with AirAsia Group Bhd (Newco) shares on the basis of one new Newco share for every one existing AAB share held.
Newco will assume the listing status of AAB and AAB will be the wholly owned subsidiary of Newco.
Upon completion of the proposed internal reorganisation, AAB said, the management will use its best endeavours to further streamline the group structure into separately identifiable business streams to better reflect the group’s diverse operations and achieve a leaner corporate structure.
Meanwhile, AAB said the group and its wholly owned subsidiary AirAsia Investment Ltd had executed multiple agreements to partially dispose of and subsequently convert its perpetual securities investments in AirAsia Investment into new shares in RMPP, which will be the new holding company of AirAsia Investment. Currently, AirAsia Investment owns a 49% stake in IAA.
AAB noted that the proposed transaction will enable IAA direct access to the equity and debt capital markets for future fund raising and provide AirAsia Group with the financial flexibility to pursue growth opportunities in the region and beyond.
“In view of the exponential growth of Indonesia, AirAsia has ambitious plans to grow IAA significantly with the vision to double the fleet size by 2020.”
AirAsia’s direct shareholdings in RMPP will be up to 48% and effective shareholdings in IAA will be up to 48.43%.
AAB’s net profit plunged 73% to RM92.45 million for the second quarter ended June 30, 2017 versus RM342.12 million in the previous corresponding period, due to a deferred taxation of RM318 million.
The reduction in net earnings was mainly attributable to a one-off deferred tax charge of 647.2 billion rupiah (RM212 million) offset by a 134.4 billion rupiah (RM44 million) current tax credits in Indonesia AirAsia in the current quarter.
AirAsia’s revenue, however, expanded 46.5% from RM1.62 billion to RM2.38 billion.
During the quarter, the group delivered an additional 762,963 seat capacity as compared with Q2 16, which represents an additional 8% growth in seat capacity. This was achieved with the background of a 3% reduction in total fleet size from 109 aircraft in second-quarter 2016 to 106 aircraft in second-quarter 2017.
Its total debt as of end-June 2017 was RM9.8 billion, while net debt after offsetting the cash balances amounted to RM7.7 billion.
AirAsia expects the group to achieve an average load factor of 88% in the third quarter of 2017 based on the existing forward booking trend.
In view of growing demand in the region, the group is also planning to increase an additional 22 planes through a combination of finance and operating leases in the second half of 2017.
“AirAsia Group is gearing up to expand to 500 aircraft by 2027, which entails adding 30 new aircraft every year for the next ten years.”
AirAsia’s first-half net profit declined 37.5% from RM1.22 billion to RM762.4 million. Revenue came in at RM4.6 billion, 42.5% higher than the RM3.23 billion it made a year ago.
The stock was suspended in the afternoon session pending the material announcement. It closed the day two sen higher at RM3.33 on some 6.13 million shares traded, giving it a market capitalisation of RM11.13 billion.