AirAsia acquisition ‘strategic’ (5099)

PETALING JAYA: AirAsia Bhd's
acquisition of Indonesia's Batavia Air is a strategic move on the part
of the low-cost carrier as it will boost market share and enhance its
route network, according to analysts.
“The acquisition will
immediately see AirAsia's combined Indonesian market share shoot up
from the current 2% to 14%, which will greatly bolster the group's
overall traffic network,” OSK Research said in a report on the purchase.
“It
will also significantly strengthen the group's sales distribution and
agency network, which is crucial in Indonesia given the nation's low
Internet penetration coverage.”
AirAsia said its unit, AirAsia Investment Ltd, and partner PT Fersindo Nusaperkasa would acquire PT Metro Batavia, the company which operates the Indonesian Batavia Air and Aero Flyer Institute, an aviation training school.
The
acquisition, which is subject to regulatory approvals in Indonesia and
is expected to be completed by the second quarter of 2013, will see
AirAsia holding a 49% stake in Metro Batavia and Fersindo Nusaperkasa
holding the 51% majority stake.
AirAsia said it would fund the acquisition with US$80mil (RM253mil) in cash.
AmResearch
noted that from an earnings perspective, the acquisition looked pricey
Batavia Air generates around US$2mil- US$3mil net profit per annum and
the price tag of US$80mil implied a price earnings ratio of about 27
times.
However, it believed the acquisition was not entirely
about the purchase of earnings but rather to accelerate AirAsia's
domestic presence in Indonesia and to acquire off-balance sheet assets
such as an enhanced route network and increased domestic franchise and
market share.
OSK Research said pending more earnings guidance
and clarity from management, it was maintaining its earnings
projections for AirAsia for now, as it believed earnings would remain
intact.
At the current price, AirAsia is trading at 10 times
FY12 price earnings (PE) vs its peers' range of 12-15 times PE and even
lower than its Thai associate's recent listing at 12 times FY12PE.
Both OSK Research and AmRe-search have reiterated their “buy” calls on AirAsia.