Malaysia's AirAsia shares rise sharply on debut
22 November 2004
KUALA LUMPUR : Shares in Malaysian budget carrier AirAsia rose sharply on
their listing on Monday, doing well against a weaker broader market as
investors bought into the low-cost airline concept.
The stock opened at 1.25 ringgit and then rose to close Monday at 1.40
ringgit, off a high of 1.42 ringgit but still well up on its initial public
offering (IPO) retail investor price of 1.16 ringgit a share.
The performance was particularly strong in a weaker overall market which
closed the day 0.12 percent lower.
"Considering the broader market is in a correction phase, the gain so far is
commendable," Azrul Azwar, senior economist with MIDF Bhd told AFP.
Azrul did not discount the possibility of profit-taking but said the stock
should at least hold above the IPO price.
AirAsia is the first budget carrier to be listed in Southeast Asia.
Its institutional IPO tranche was priced at 1.25 ringgit and the retail
tranche at 1.16 ringgit, well below the indicative price of 1.40 ringgit, to
raise some 720 million ringgit.
At the time, some analysts expressed concern that the relatively low pricing
might reflect investor caution at the business plan but the lower level also
allowed for greater gains if there was sufficient demand.
AirAsia executive director Kamarudin Meranum told AFP that the company feels
"great" with the gains.
"It is great. As promised, investors will be rewarded," he said, adding that
the gains reflected investor support and trust in AirAsia.
Kamarudin said AirAsia would sign a deal to buy a 49 percent stake in
defunct private airline PT AWAir in Indonesia this week and has allocated up
to 10 million dollars to expand its operations there.
"We expect to invest up to 10 million dollars to expand the operations in
Indonesia," he said, adding that there was strong potential in the country.
Asked what the airline's challenge would be now, he said: "We will now focus
on our operations - to build up new routes and business."
Kamarudin downplayed the threat posed by Qantas-backed budget carrier
Jetstar which will operate out of neighbouring Singapore, saying it was not
a competitor to AirAsia.
"Our biggest competitor is our cost. We do not consider other budget
carriers as competitors. Instead we are their competitors," he said.
Asia's newest budget carrier Jetstar Asia received its air operator's
certificate from the Singapore government Friday, paving the way for the
start of commercial flights next month.
Budget carriers Valuair and Tiger Airways began operations in Singapore
earlier this year.
Kamarudin said the Singapore-based carriers were up against an already
established carrier in AirAsia and were operating from a high cost
territory.
Asked about a planned decision to purchase new aircraft, he said it should
be finalised within two months.
"Our board of directors will meet soon. We hope to decide in the next one to
two months."
Kamarudin said AirAsia plans to purchase 40 new planes from either Airbus or
Boeing, with an option to purchase 40 more.
It currently operates a fleet of 24 Boeing 737 aircraft on some 322 flights
a week from Kuala Lumpur International Airport to 14 domestic and eight
international destinations.
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