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Kuala Lumpur - AirAsia Bhd's shares skidded as much as 13% on Wednesday as investors spooked by a report questioning the Malaysian budget carrier's accounting remained unconvinced by chief executive Tony Fernandes' confidence that his firm can raise cash readily and has no need for recapitalisation.
By 08:45, the stock had trimmed losses but was still down 7.9%, giving Asia's biggest low-cost airline a market value of $1.23bn. The shares have dropped nearly 30%, to five-year lows, since the June 10 report by little-known firm GMT Research first startled shareholders.
The slide came after Fernandes responded to concerns about AirAsia's operations while attending the Paris Airshow, without referring directly to the GMT report which said the carrier used transactions with associate companies to boost earnings.
"We have so many cash-raising opportunities from our fleet, our investments, from our national cash operations, there is no need for a capital raise," Fernandes told Reuters on the sidelines of the show.
On June 15, Fernandes wrote to investors saying AirAsia plans to raise as much as $300m from convertible bond issues at loss-making associates in Indonesia and the Philippines, and will sell and lease back up to 20 planes.
"The concern is whether they can execute the fund-raising. Until they announce something on this, the stock will remain weak," said Kee Hoong Tan, an analyst with Alliance DBS Research, who has a 'Hold' recommendation on the stock.
AirAsia would have to inject more of its own funds if it fails to find third-party investors and this would be a strain on its balance sheet, he said.
In a stock exchange filing on Wednesday afternoon, AirAsia made its first official comment on the slide in its stock without referring directly to the GMT report.
"Due to the recent movement in AirAsia Bhd's share price, the management would like to assure the investment community that the company has a solid footing, strong balance sheet, rich in assets and good business outlook," it said.
The firm said AirAsia's accounts are transparent and prepared in accordance with international and local accounting standards. It said its Indonesia affiliate will meet payments due for lease, brand and licence fees due to AirAsia from the current quarter.
Shares were little changed after the filing, and bankers were sceptical about the fund-raising plans.
"We don't see how the convertible bonds are going to get done. How can investors have the confidence to put money in the loss-making units?" said one transportation banker at a US bank, speaking on condition of anonymity.
Speaking in Paris before Wednesday's share slide, Fernandes said AirAsia, which owns 128 aircraft and picked up a series of airline awards on Tuesday, could easily raise $1bn in sale and lease back deals, plus had investments worth $500m.
"We don't want to do too many because we don't need that much cash. But it's just to show the market that it can be done and crystallise the value," Fernandes said. "We're a solid company with a solid balance sheet and a solid business plan."
