Investor education starts for AirAsia X’s Malaysia IPO

Bankers started investor education yesterday for AirAsia X’s Malaysian initial public offering. The low-cost, long-haul airline, which operates primarily in Asia-Pacific, is aiming to raise about $250 million to $300 million from its offering, with the listing targeted for July, sources say.

AirAsia X is controlled by AirAsia, the Malaysian low-cost carrier (LCC) founded by Tony Fernandes, and is responsible for all the long-haul international flights under the AirAsia brand.

It will be the first IPO to hit the Malaysian market since the general elections on May 5, which sources have said would be a key factor in deciding the direction of the deal flow this year. Malaysian stocks have climbed more than 5% from a low immediately before the ruling coalition won a thin majority in the elections to extend its decades-long rule of the country.

There have been only two IPOs completed so far this year in Malaysia — Cliq Energy’s $118 million offering in April and insurance product manager Tune Ins’s $91 million deal in February — Dealogic data show.

The AirAsia X public offering follows the popular IPO of Asia Aviation, the holding company of budget airline Thai AirAsia, in May last year, which raised $143 million after the price was fixed near the top end of the price range. AirAsia has also expressed an intention to list its associate Indonesian business. The idea behind the separate listings is to enable its various units to accumulate capital and debt so that they can buy their own aircraft in the future, thus easing the financing burden and leverage at the group level.

Sources said the timetable for the AirAsia X IPO is not set in stone at this stage, but according to a term sheet, the management roadshow is expected to start on June 10 and the listing tentatively scheduled for July 10.

The offering comprises 790.1 million shares, which represent 33.3% of the enlarged share capital, according to the term sheet. About 68.1% of the shares are targeted at institutions, while the remaining 31.9% will be offered to retail investors. The deal will consist of 75% primary shares and 25% secondary shares.

There is also a greenshoe option of up to 15%, which will be all secondary shares.

The selling shareholders are Aero Ventures, Orix Airline and Manara Malaysia I. They currently own 74.0% of the company, but will see their combined stake reduced to 47.2% after the IPO, according to the company’s draft prospectus.

Aero Ventures is an investment holding company that is controlled by Fernandes and Asmat Bin Kamaludin, who are both substantial shareholders of AirAsia. It currently owns 52.2% of AirAsia X, while Orix Airline and Manara hold 10.9% each.

AirAsia X plans to use the proceeds for the repayment of bank borrowings, general working capital, and capital expenditure, according to the term sheet.

The airline currently serves 14 destinations across Asia, Australia and the Middle East from its hub in Kuala Lumpur. It operates a fleet of nine A330-300s for scheduled services, and has two A340-300s that are currently wet-leased, according to the draft prospectus. Under a wet lease, the airline leases its aircraft together with a complete crew, maintenance and insurance to another airline.

The fleet represents the largest LCC wide-body aircraft seat capacity in the Asia-Pacific region, it says. Together with the broader AirAsia group, the company is working towards creating the world’s first global, multi-hub LCC network, with complementary short-haul and long-haul networks.

The airline says it believes it operates in an underpenetrated home market relative to other major Asian airports in terms of long-haul flights, which provides additional growth opportunities for it to serve some of the world’s largest and fastest-growing aviation markets.

Its passenger volume increased at a compound annual growth rate (Cagr) of 76.8% from 2008 to 2012, and its revenue grew to M$2 billion ($655 million) last year from M$230.7 million in 2008.

CIMB, Credit Suisse, Maybank and Morgan Stanley are joint global coordinators for the IPO, and Barclays, BNP Paribas, Citi, CLSA and HSBC join them as bookrunners, sources said yesterday. Morgan Stanley, which was listed as a joint bookrunner in the draft prospectus, was added to the global coordinator line-up shortly before the start of the investor education and CLSA was added as a joint bookrunner at the same time.

Meanwhile, Malakoff Corp, the largest independent power producer in Malaysia, is now planning to complete its IPO “no later than the first half of 2014” instead of in the second quarter of this year, parent company MMC Corp said in a Bursa Malaysia filing on Friday. The delay is partly due to major maintenance works at one of its power plants, it said.

Sources have said that Malakoff Corp would be seeking to raise about $1 billion from an IPO in the second quarter. It was expected to be one of the first sizable Malaysian deals to hit the market this year.

“The Tanjung Bin power plant will be undergoing major maintenance works which are expected to be substantially completed by the second half of 2013,” MMC said. A second reason for the delay, it says, is the “potential positive outcome of certain growth opportunities currently being pursued by MCB (Malakoff Corp), which may, among others, increase the effective power generation capacity of MCB.”

According to the company’s draft prospectus published in January, CIMB, Credit Suisse, J.P. Morgan and Maybank are joint global coordinators and bookrunners for the deal. Bank of America Merrill Lynch, Deutsche Bank, HSBC, Morgan Stanley, Nomura and RHB join them as bookrunners.