Recall Airasia order(S) to buy new planes?
One of them orders which saw Airbus to sponsor 5o million US to one chapalang no name F1 team? ( ask Liverpool if it is easy to find a 50 million USD sports sponsor? )

Anyway... this order to buy them airplanes...the value has grown exponentially over the years...i just saw in their latest qr, the commitment value to buy airplane has jumped to 98 Billion!!!

Lmao.

This coming from a company that is resorting to buy, sale and leaseback to survive....

So can this sale and leaseback company got enough king fu to buy, sale and leaseback to continue and continue and continue and continue this trick for this 98 billion worth of airplanes?

Despite the loss, AirAsia got 3bn revenue but AAX only 1bn with higher loss

As a company AirAsia is too entrenched in the life of people traveling cheap in this region to fail. Raya sure all flights fully booked, covid or not. Christmas too.

So I’ll enter at RM1 now, forget about it, wait for the scandal thing to resolve itself, capital gain by mid to late 2021

But that's what people said last time. "Banks are too big to fail".
For me, I wouldn't want a company managed by people who are corrupt/committed fraud because I'm not surprised if the balance sheet can be fraudulent too. This makes it hard to make decisions.

The context with banks is different. The US-based banks that failed in subprime were investment banks.

AirAsia is a flight service provider, not a financial service provider. US-based bankers got greedy because of the incentive structure, which allows them to profit on transactions instead of the actual performance of what they are selling. So the business model is lined with moral hazards (eg: they don’t really care if the bond/unit trust/mutual fund/etc they sell you is junk because it’s not their money).

AirAsia takes your money and provide you a flight service, and that’s the end of your relationship as a customer with the company. If you find it tolerable, you will return. If not, you won’t. So it’s AirAsia’s incentive to not make the low cost flights too miserable.

Yes, COVID-19 dampened the demand, to put mildly. But there are upcoming festivities that will provide some demand for AirAsia, at least domestically. In terms of revenue, AirAsia unlikely to drop 50% over two quarters.

As for the corruption management etc, well, I don’t have insider info nor do I work in there. I just have this fundamental belief that the scandal will sort itself in two years. Either Tony acquitted or management roles change. But the company will still be there because the business model itself is not hinging on if Tony took bribes

You have your points.
So does yygdrasil.

However, let's talk about the company itself.

How did Airasia got so big?
Was it because it used debts/leverage to built itself up?

Buy/borrow/buy... use whatever cash flow to buy new planes again.

That was what it did. Agree?

That was obviously not gonna to last. It got to the point where Airasia had only less than a billion in cash and more than 12 billion in loans.

That buy and borrow had to slow down. So it asked to defer its obscene backlog of new planes.

Got breathing space but not enough. Clearly it was grossly over leveraged.

** in the midst came that 18billion usd new airplane order. In which the following year, that chapalang F1 team got a usd50 million sponsorship. The F1 team that was not owned by Airasia. Duh **

Next came the leasing plan.

Sell whatever plane it had and then lease back. Use the money to pay back loans. And yeah, to hook investors in, despite in dire need of money, Airasia gave away millions in dividends.

New planes also sell.

So the balance sheet bank borrowings came down in a hurry. But the lease amount soared.

Financial engineering at its finest.

But now with lesser planes flying, can Airasia be able to finance its leases???

And yeah, Airasia still got plenty of planes ordered with Airbus. Latest quarter, the amount is 99.6 Billion.

99.6 Billion. Not too much?

Can this buy, sell and lease back be played for so long?

And yeah, every company hedges. It is a norm. However, there are some companies who over does it their hedging turns into gambling. Have you check how much? If I say their total hedges is more then 2.5 Billion... would you say too much?

Many years ago Airasia once lost more than 500 million in hedging. Tony had to apologise and say no more betting. But yet after these many years, Airasia is still hedging. Betting on oil, interest rate and currency. All which had been having huge swings. A bad hedge could see Airasia lose millions.

Latest qr? Any hedging losses? Better go check......


And yeah, its qr is getting more complex to read. So many inter related companies. How does one really gauge the validity of its accounts?

So if I have to base any trading decision on such a company, I always, always take the easy way... No bet. If it goes up, so be it.

Anyway gl.

This post has been edited by Boon3: Feb 29 2020, 10:55 AM

In short: AirAsia’s survival in 2020 and 2021 is based on if it can take in enough revenue to meet the minimum debt obligation or whatever bets its making. It is unlikely to see profit until end-2021 or early-2022.

So to buy/hold now is to believe it can weather the storm and return to profitability in mid-term. As you said: good luck to the optimists like me!

Agreed! I also can't stand corruption & nepotism although I can't prove that's happening in the management.


Good point!


Valid points! About that sell & lease airplane models, I think Cherroy once pointed out that it's a normal airlines practice.

Maybe I can send you as my proxy if you want in the next AGM, then you can grill them.
You can keep the door gifts.

Let's assume you are right to be optimistic about Airasia and lets base on your assessment that Airasia would see profit come end 2021...

But what about now till then? That's a long time.

What if it continues to see losses? Not possible? If losses continue to happen then how? Wouldn't the stock react to it losses and falls more? If that's the case, why buy/hold now?

Precisely because I can’t predict how low it might drop until end-March, I rather just enter now and don’t think too much about it. Sure, most traders would think about exit plan, cut loss, etc. I’m more of a “if gain, great, if not, too bad” kind of person. If you call my behaviour as “betting” I wouldn’t be able to refute you

Of course I’m not betting my life savings on this. I’m more of a REITs and yield guy. I just happen to think people are too pessimistic about AirAsia and I would like to bet on it

As for exit price, I’ll be happy with anything above 1.30 by end-2021

How would you honestly rate this tactic?

At best, as per your analysis, is 1.30 or 30% upside. Time frame - close to 2 years.

But you don't know how low it would drop....

If drop to 90sen, or drop to 80sen or drop to 70sen...Then you think your risk/reward is even worth it?

Or wouldn't your hard earned money be much better off in a Reit?

How high do I want it to go? Probably MYR 10. But is it a realistic expectation?

Some people spend money in Casino for thrills, I do this at home the greater reward is the satisfaction of calling the movement

Also, don’t call it an analysis lol. It’s nothing more than armchair fantasising

should go less than RM1 tomorrow.

company loss + political crisis + global crisis + coronavirus + company scandal .... really all in one. Couldn't be worse!!

US restricting travel already

will it burst?

Surprisingly it went up 2 cents after opening.

Early morning optimism

5 cents liao. those who bought at 0.98 untung lah.

For quick exits with bulk purchase ya it’ll be up down up down in the coming months. I’m gonna ride this until end-2021

This post has been edited by Intimidated: Mar 2 2020, 01:17 PM

they just declared they've sold 50k AAX unlimited pass within 1 week

that's fast RM25mil revenue injection within a week!

wah ........ so many ppl bought?

I'm still undecided whether I should buy AAX unlimited pass.