Good run in AAX share price on its attempt to takeover Capital A's via different route

The recent global IT outage may have caused massive disruptions in the airtravel. AirAsia flights are also affected. But this will not bring AirAsia to its knees. Instead, AirAsia X Bhd (AAX) is looking good with a strong possibility of it climbing further.

The counter rebounded from a low RM1.14 on 26 Apr 2024 to close at RM1.55 on July 26 and could attempt to shift higher ahead. But AAX is still way below its 52-week high of RM2.63 in September last year but fell to a low of RM1.14.

The budget carrier reporting a massive drop in net profit to RM366.5mil in FY Dec 2023 from RM33.1 billion a year ago. Its revenue surged to RM2.5 billion from RM659.6 million a year ago. Subsequently, the airline posted a 76% decline in net profit to RM80.1 million from RM328 million a year ago. This is despite a leap in revenue to RM908.9 million from RM548.8 million a year ago.

In terms of Price / Book Value rating, the stock is presently trading at a multiple of 3.3x based on its book value per share of 44 sen as of end-Mar 2024. Forward earnings will be underpinned by rising air travel demand as the group saw a 42% YoY increase in passenger traffic (to 880,265 passengers) in 2Q2024. This was driven by peak spring travel season and Eid holiday during the period.

But the positive sentiments on the counter could be due to the recent news that AAX will be buying Capital A Bhd's aviation business earlier than expected.

AAX announced on July 26 that it will be buying the aviation business directly, and not via a new company (NewCo) under an internal reorganisation proposed previously, to expedite the takeover.

On April 25, AAX announced that it would be taking over Capital A’s aviation business — under AirAsia Bhd (AAB) and AirAsia Aviation Group Ltd (AAAGL) — through an internal reorganisation involving the setting up of a NewCo that would take over AAX's listing status.

The aviation group expected the proposals to be completed by the fourth quarter of 2024. AAX had proposed to acquire the aviation business for RM6.8 billion.

As for AAB, AAX proposed to acquire it for RM3.8 billion, to be satisfied by assuming RM3.8 billion of some RM3.83 billion worth of debt that Capital A owed AAB. The deal values the entire equity interest in AAAGL at between RM2.7 billion and RM3.5 billion.

AAAGL owns Thai AirAsia, Philippines AirAsia, Indonesia AirAsia and AirAsia Cambodia. As for AAB, which operates AirAsia Malaysia, the deal values its equity interest at between RM3.48 billion and RM4.37 billion.

It is quite strange for the company to take a different route in acquiring the airline business from Capital A. Perhaps more clarity will emerge in subsequent weeks but in the meanwhile, it is all good as investors gets a piece of the action in the booming air travel.