It’s one one in three of these markets
My eyes rolled when I read the CEOs of above two cos recently said that their cos follow the accounting rules. (Remember, credible doubts have arisen over whether their accouting reflects their financial position.)
The best riposte to “We follow the accouting rules” came recently when an ex-convict recently addressed a FT conference.
“There may be a fundamental difference between a company following the rules and a company presenting a true picture of its financial position,” said Andrew Fastow, the infamous treasurer of the even more infamous Enron, to a FT conference.
Or as he puts in another way, that it’s possible for a company to comply with accounting standards while at the same time painting a misleading picture of its real financials.
I tot it tragically funny when he said he went to prison partly for doing things that got him a best CFO award: innovative off-book entities.
Debt of 11.5 billion ringgit ($3.1 billion) is already uncomfortably high for an outfit expected to make 1.9 billion ringgit in EBITDA this year. AirAsia’s part-owned sister airlines, especially in Indonesia and the Philippines, owe it increasing sums: amounts due from associates were nearly 2.5 billion ringgit at the end of 2014.
The gloomy case, as made by Hong Kong’s GMT Research, is that this cannot last. AirAsia is booking profits from affiliates that it cannot collect. While restrictions on foreign ownership mean it is only a minority shareholder, it effectively controls these airlines and should consolidate their accounts. Facing up to reality would force a big equity issue.
AirAsia counters that its accounts are transparent, debt is coming down, and cheap fuel and reduced competition should make for a “very good year”. Selling and leasing back planes will help cut debt. It’s also planning to publish pro-forma consolidated accounts.
Fernandes says local partners in Indonesia and the Philippines will each inject over $80 million of fresh equity, and both units will sell $100 million-plus of convertible bonds, before floating in 2017. Some of this will be used to pay back sums owed to the parent.
Well, perhaps. But new investors in the affiliates will need to be comfortable with much of their cash going to repay debts, while also believing in a bright future for these units. As HSBC analysts note, both are sub-scale and face powerful local rivals in Lion Air and Cebu Air.
The real moral of the stories of Noble and AirAsia is that when one makes money or is in fashion, no-one cares about accounting details, But when the fashion changes, or one loses money, the daggers come out and the hyenas and vultures circle.
And don’t like a lost co, set up a website and slime away
(And that of every other Asian legacy airline like Cathay, Qantas, Thai and MAS)
When SIA sold to Delta its 49% stake in Virgin Atlantic for US$360, which it has owned since 1999, it said it was selling because of increased competition in its local market, where it wants to keep its focus.
In the same week, last week, AirAsia announced a US$9bn order for 100 A320 planes. AirAsias’s order is for 64 of the A320neo (new engine option) and 36 of the A320ceo (current engine option) aircraft.
Background info on SIA sale, so I don’t get dumb comments
Shares in the London-listed Indonesian coal miner Bumi rise sharply for a second day after a proposal from Indonesia’s powerful Bakrie family to split from the firm. The dynastic Indonesian Bakrie family has proposed a split from Bumi that they helped to create with the British financier Nathaniel Rothschild. Wonder what the guy who bot at 11 thinks?
A.I.A. to pay US$1.7bn for ING’s Malaysia business. A.I.A. said the acquisition will catapult it to the No. 1 position in Malaysia’s lucrative life insurance market. For the Dutch insurer ING, it is the first major deal in its plan to divest its Asian assets.
The founders of Malaysia’s AirAsia, Tony Fernandes and Kamarudin Meranun, are set to launch three IPOs in 2013 worth more than US$500 million (S$614 million).
Tune Group, a financial services-to-discount hotel conglomerate owned by Fernandes and Kamarudin, is expected to launch US$65 million IPO of its insurance arm, Tune Insurance, not later than the first quarter of 2013, according to two sources with direct knowledge of the deal.
Meanwhile, AirAsia’s long-haul arm, AirAsia X, recently hired CIMB, Malayan Banking Bhd and Credit Suisse Group for a US$250 million IPO expected early next year.
The group is looking to list its Indonesia operations, Indonesia AirAsia, by the first quarter of next year in a deal that could raise up to US$200 million.
The listing plans also come at a time when Fernandes is stepping down as the chief executive officer of the Malaysian-listed airline to focus on regional growth through Indonesia. The group’s plan to buy up to 100 Airbus jets, potentially worth about US$9 billion, is designed to fuel the growth of what is becoming a cluster of related airlines under Fernandes, who placed a record order for Airbus jets last year.
With an operating fleet of more than 116 aircraft, AirAsia has ordered a total of 375 Airbus jets as part of dramatic expansion plans that include the acquisition of Indonesia’s Batavia Air.
DBS Group, South-east Asia’s largest lender, is selling more than half of its 20.3% stake in The Bank of Philippine Islands (BPI) to conglomerate Ayala Corp for 25.6 billion pesos (S$757.3 million). “With the divestment of a 10.4 per cent interest in BPI, DBS will hold an aggregate 9.9 per cent investment in the bank. DBS will continue to have representation on the BPI board.”.
DBS, which has been a strategic investor in BPI since 1999, would realise a gain of about S$450m against the carrying value of the investment.
Ayala is the biggest shareholder in BPI, the Philippines’ largest bank by market capitalisation.
DBS is selling the stake at a time when the Philippines stock market is among the best performing markets in South-east Asia. The Philippines main index has gained some 23% this year, with BPI 42%.
Nice little profit in a rising market. Can’t blame DBS for not trusting the bullishness that the Philippines has got its act together finally. It’s cyclical, juz like another peace treaty signed with Muslim rebels in the South.
Japan intends to start lending Burma money aiming to help transform Burma into a production and investment hub to rival Vietnam. “Japan’s big trading companies are at the forefront of the investment effort. Mitsubishi, Marubeni and Sumitomo have signed an agreement with the Myanmar government to develop the initial phase of Thilawa, a 2,400-hectare site close to the southern port of Yangon, which will feature housing, commercial space and an industrial park,” reports FT