AirAsia X in lacklustre debut amid caution over low-cost model

Published: 6:25 PM, July 10, 2013
Updated: 10:40 AM, July 11, 2013

KUALA LUMPUR – AirAsia X closed flat in its trading debut yesterday after raising 988 million ringgit (S$396 million) in Malaysia’s biggest initial public offering this year, with investor reticence towards the stock underscoring uncertain business prospects for long-haul budget carriers as competition in the sector heats up.

Investors also point to its history of red ink as a reason for its performance on its first trading day.

Shares in AirAsia X, which climbed to as high as 1.28 ringgit in Kuala Lumpur yesterday, closed at its IPO price of 1.25 ringgit. The airline initially tried to market the stock at 1.45 ringgit but revised it down, saying it wanted to make the stock available to a wide range of retail investors.

The carrier, a spin-off from Asia’s biggest budget carrier AirAsia, was the country’s most actively traded stock with more than 160 million shares changing hands.

“AirAsia X has just gotten out from losses, and their track record is quite short,” said Mr Ang Kok Heng, chief investment officer at Phillip Capital Management. “Some fundies also don’t like airline stocks as there are many risks involved, such as exposure to jet fuel prices volatility and terrorism,” he said.

The share sale will help AirAsia X to take on debt to expand its fleet as the carrier plans to set up hubs in Thailand and Indonesia along with its partners, Chief Executive Officer Azran Osman-Rani said yesterday. AirAsia X may also consider an additional hub in Chennai in south India, Mr Azran said. AGENCIES