AirAsia shares battle back after critical report

[KUALA LUMPUR] Shares in Malaysia-based AirAsia rebounded more than eight per cent on Thursday following precipitous falls over the past week sparked by a critical report by a research house.

Hong Kong-based GMT Research had on June 10 questioned the accounting practices, profit outlook, cash flow and structure of Asia's biggest low-cost airline by fleet size.

From June 9 through the end of trading on Wednesday, the company's market capitalisation had declined by around 1.58 billion ringgit (S$568 million), or about 27 per cent.

AirAsia group boss Tony Fernandes earlier this week hit out at the report by a GMT Research analyst.

"It is kind of sad how one guy who wants to make money can short stock and create mayhem," he told Malaysia's The Edge Financial daily.

Analysts covering AirAsia, while noting that the carrier faces a tough business environment in the regional low-cost sector it has helped to pioneer, have said the GMT Research report raised no new issues.

The stock rose 8.50 per cent in the early afternoon to 1.66 ringgit.

"AirAsia remains the leader in low-cost travel in Asia. In my view, the business model remains intact despite concerns that its cash flow is weak," said Shukor Yusof of Malaysian research firm Endau Analytics.

From June 9 through the end of trading on Wednesday, the company's market capitalisation had declined by around 1.58 billion ringgit ($420 million), or about 27 per cent.

Mr Shukor called it a buying opportunity.

AirAsia Malaysia CEO Aireen Omar has taken advantage, buying 45,000 shares worth 78,300 ringgit in recent days, according to a stock exchange filing on Wednesday.

Brokers said her share purchase, along with the company's defence of its operations, had helped allay the bearish sentiment.

A former record industry executive, Mr Fernandes, 51, bought then-bankrupt AirAsia in December 2001 for one dollar.

He turned it into a roaring success with its rock-bottom fares and a playful image embodied by its baseball cap-wearing boss, who has been called Asia's Richard Branson.

The airline suffered a major setback in December with its first disaster - the crash of Indonesia AirAsia flight QZ8501 which killed all 162 aboard.

Analysts generally express confidence in AirAsia's ability to put the crash behind it and respond to intensifying industry competition.

But they have noted that continued losses at the carrier's Philippine and Indonesian units remains a concern for the group.

Mr Shukor said the stock could face "a bit more downside before it stabilises." AirAsia in May reported that first-quarter net profit climbed seven per cent year-on-year to 149.3 million ringgit.

AFP