- 02/03/16--17:03:
- AirAsia is increasing its stake in associate Think Big (BIG) from 46.1% to 71.9% (becoming a subsidiary), by acquiring 25.8% stake from shareholder Tune Money for cash consideration of RM101.5m. The agreed price is based on previous BIG valuation of US$109m, when AIMIA invested US$17.1m for a minority stake in BIG back in Jan 2014.
- Based on AirAsia latest 9M15 result, AirAsia has a cumulative unrecognized losses amounting to RM31.4m for its 47.8% stake (later diluted to 46.1% by end 2015 after AIMIA increased its stakes). With the acquisition, AirAsia would need to consolidate BIG’s account and recognize the cumulative losses in 1Q16. Given BIG’s track record of losses (since startup in 4Q11), we do not expect BIG’s turnaround within the next 2-3 years, which may drag AirAsia’s earnings performance. BIG reported losses of RM18.2m for 9M15 and RM10.6m in FY14.
- We understand that BIG currently has a membership base of 15.6m across Asia Pacific (vs. 10m back in Jul 2014). BIG aimed for 20m memberships by 2017, leveraging on the regional connectivity of AirAsia group and their partners.
- We are relatively negative on the acquisition, given the high prices offered for a company that is loss making and may exert drag to AirAsia’s earnings in the near term. Nevertheless, we see potential turnaround by 2017-18, when BIG achieves its 20m membership target and able to extract synergies within AirAsia group.
- World crisis (ie. war, terrorism and epidemic outbreak), delay in KLIA2 completion, prolong surge in jet fuel and high speed train infrastructure between Singapore and P. Pinang.
- Unchanged.
- Buy
- 1) Sustaining lowest cost LCC operator in Asia with largest network and strong brand name; 2) Low jet fuel price; 3) Increasing ancillary income; and 4) Routes rationalization of major competitor MAS.
- 1) Higher cost of living faced by consumers (from GST implementation and subsidy rationalization); and 2) Regional air-demand slowdown and political issues.
- Strengthening of US$.
- We remain positive on AirAsia’s outlook given the expectation yield sustainability and lower jet fuel costs. Maintained Buy with unchanged TP of RM2.00 based on unchanged 20% discount to SOP.
KUALA LUMPUR (Feb 3): AirAsia Bhd is increasing its stake in Think BIG Digital Sdn Bhd (Think BIG) to 71.9%, from 46.1% currently, after acquiring a 25.8% stake from its affiliate Tune Money International Sdn Bhd (TMI) for RM101.5 million or RM49 per share.
In a filing with Bursa Malaysia, AirAsia said it has entered into a share sale agreement with TMI to acquire 2.07 million shares, representing 25.8% of the issued and paid-up share capital of Think BIG, which will be satisfied via the company’s internally-available funds.
The budget carrier said its increased stake in Think BIG would improve AirAsia’s topline and promises high returns on investment.
“Additionally, once AirAsia increases its stake in Think BIG to above 50%, Think BIG will no longer be classified as an associate and AirAsia will be able to consolidate Think BIG contributions to Company revenue, which would improve AirAsia’s top line,” the filing read.
“(Think BIG has a) high return on investment, as the company has a business plan to grow its loyalty business and membership base significantly,” it added.
AirAsia said a higher stake in Think BIG would also accord it with greater strategic control over the day-to-day operations of Think BIG, the owner and operator of AirAsia’s BIG loyalty programme.
AirAsia said greater control would also accelerate decision-making with regards to AirAsia priority items that would help support the Company’s business plan and commercial objectives.
“Acquiring the remaining 25.8% stake in Think BIG Digital will confer onto AirAsia additional benefits that can only be realised through greater controlling stake of Think BIG Digital.
“This would allow AirAsia to extract greater value from the AirAsia BIG loyalty programme, managed by Think BIG Digital,” it added.
The transaction is a related party transaction, as two of TMI’s shareholders and directors, Tan Sri Anthony Fernandes and Datuk Kamarudin Meranun, who is also AirAsia executive chairman, are shareholders and directors in AirAsia.
Both hold a 35% stake each in TMI and a 19% indirect stake each in AirAsia. AIMIA Holdings UK II Ltd holds a 17% stake in Think BIG.
AirAsia said upon acquisition, TMI’s stake will be reduced to 11.1%.
AirAsia also said the purchase price is based on the agreed valuation of Think BIG’s 100% equity at RM393.4 million, with the valuation taking into account the previous share acquisition and subscription in Think BIG by AIMIA in 2014, which valued the company at US$109 million (RM459.82 million).
The transaction is expected to contribute positively to the earnings and cashflow of AirAsia in the future, through its shareholding in Think BIG, AirAsia said.
However, it will not have an effect on the audited consolidated NA per share or the consolidated gearing of AirAsia for the financial year ending Dec 31, 2016, and AirAsia will not be assuming any of Think BIG's liabilities.
AirAsia closed 4 sen or 2.82% lower at RM1.38 today, for a market capitalisation of RM3.84 billion.
http://www.theedgemarkets.com/my/article/airasia-ups-stake-think-big
In a filing with Bursa Malaysia, AirAsia said it has entered into a share sale agreement with TMI to acquire 2.07 million shares, representing 25.8% of the issued and paid-up share capital of Think BIG, which will be satisfied via the company’s internally-available funds.
The budget carrier said its increased stake in Think BIG would improve AirAsia’s topline and promises high returns on investment.
“Additionally, once AirAsia increases its stake in Think BIG to above 50%, Think BIG will no longer be classified as an associate and AirAsia will be able to consolidate Think BIG contributions to Company revenue, which would improve AirAsia’s top line,” the filing read.
“(Think BIG has a) high return on investment, as the company has a business plan to grow its loyalty business and membership base significantly,” it added.
AirAsia said a higher stake in Think BIG would also accord it with greater strategic control over the day-to-day operations of Think BIG, the owner and operator of AirAsia’s BIG loyalty programme.
AirAsia said greater control would also accelerate decision-making with regards to AirAsia priority items that would help support the Company’s business plan and commercial objectives.
“Acquiring the remaining 25.8% stake in Think BIG Digital will confer onto AirAsia additional benefits that can only be realised through greater controlling stake of Think BIG Digital.
“This would allow AirAsia to extract greater value from the AirAsia BIG loyalty programme, managed by Think BIG Digital,” it added.
The transaction is a related party transaction, as two of TMI’s shareholders and directors, Tan Sri Anthony Fernandes and Datuk Kamarudin Meranun, who is also AirAsia executive chairman, are shareholders and directors in AirAsia.
Both hold a 35% stake each in TMI and a 19% indirect stake each in AirAsia. AIMIA Holdings UK II Ltd holds a 17% stake in Think BIG.
AirAsia said upon acquisition, TMI’s stake will be reduced to 11.1%.
AirAsia also said the purchase price is based on the agreed valuation of Think BIG’s 100% equity at RM393.4 million, with the valuation taking into account the previous share acquisition and subscription in Think BIG by AIMIA in 2014, which valued the company at US$109 million (RM459.82 million).
The transaction is expected to contribute positively to the earnings and cashflow of AirAsia in the future, through its shareholding in Think BIG, AirAsia said.
However, it will not have an effect on the audited consolidated NA per share or the consolidated gearing of AirAsia for the financial year ending Dec 31, 2016, and AirAsia will not be assuming any of Think BIG's liabilities.
AirAsia closed 4 sen or 2.82% lower at RM1.38 today, for a market capitalisation of RM3.84 billion.
http://www.theedgemarkets.com/my/article/airasia-ups-stake-think-big
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