AirAsia Bhd. Group Chief Executive Officer Tony Fernandes said a research report that questioned the company’s accounting has created “mass hysteria” and the airline’s share price will recover from the current plunge.
AirAsia has plenty of cash and other assets including 128 aircraft should it need to raise money, Fernandes told Bloomberg TV’s Guy Johnson at the Paris Air Show Tuesday.
Sepang, Malaysia-based AirAsia’s accounting, profit generation and cash-flow issues were questioned June 10 by Hong Kong-based GMT Research in a report. Shares of the budget carrier plunged with record volumes in Kuala Lumpur trading in reaction to the report, and on Tuesday they slumped 8.4 percent to close at the lowest level in almost five years.
“Calm head here, share prices overreact,” Fernandes said. “But the fundamentals of the company are strong. We are not going to do any short term things because of this report, because everything was in plan anyway. Proof is in the pudding. We will put the results out and then we are sure people will see tremendous value in AirAsia stock.”
AirAsia fell 7.3 percent to 1.52 ringgit as of 2:52 p.m. in Kuala Lumpur trading Wednesday, while the FTSE Bursa Malaysia KLCI Index rose 0.3 percent.
AirAsia has a “solid footing, strong balance sheet, rich in assets and good business outlook,” it said in a stock exchange filing Wednesday. “Cash flow continues to strengthen due to capacity reductions taken last year, improved demand especially with the recovery in Chinese traffic, and a much more rational marketplace in all our territories especially Malaysia.”
GMT Research founder Gillem Tulloch said in an e-mailed response on Tuesday that he couldn’t comment for now. The research report was for clients only and the firm won’t publicly discuss the matter until June 24, Tulloch previously said.
GMT Research is an accounting research firm licensed by Hong Kong’s Securities & Futures Commission and isn’t a short seller, the firm said on its website. GMT, along with Iceberg Research and short seller Muddy Waters, criticized commodity trader Noble Group Ltd.’s accounting practices earlier this year.
The report’s contents were “highlighted by me for the last few quarters, it’s very much part of my strategy to turn around Philippines and Indonesia,” Fernandes said.
AirAsia is planning to sell convertible bonds for $100 million to $150 million each for its Indonesia and Philippines units, according to a document the airline sent to investors June 15. AirAsia plans to be paid about 1 billion ringgit ($267 million) from the bond issue, according to the document.
The airline’s second quarter looks “very strong” and bookings in the third and fourth quarters are good, Fernandes said. The company’s Indian operations are “well on the way to break even,” he said.
For more on the 2015 Paris Air Show, go here: Special Report