AirAsia Jumps on Profit Surge, Dividend Plan: Kuala Lumpur Mover

AirAsia Bhd., Asia’s biggest discount carrier, jumped the most in 30 months in Kuala Lumpur trading after saying it will adopt a dividend policy this year as profits rose for a fourth straight quarter.

The stock surged 8.3 percent to 2.86 ringgit at the close, the most since Aug. 5, 2010. It was the third-biggest gainer in the MSCI Emerging Markets Index. AirAsia shares have fallen 21 percent in the past 12 months. The benchmark FTSE Bursa Malaysia KLCI Index was little changed today.

Net income more than doubled to 350.6 million ringgit ($113 million) in the three months ended December, according to an exchange filing yesterday. The profit beat the 301.3 million ringgit average of six analysts’ estimates compiled by Bloomberg. The Sepang, Malaysia-based airline also said it will begin paying 20 percent of annual net operating profits as dividends.

“It’s the right time to pay dividends,” Group Chief Executive Officer Tony Fernandes, who took over the airline in 2001, said in a telephone interview with Bloomberg Television’s Susan Li today. “We’ve always said to our shareholders give us 10 to 12 years to build the infrastructure, build the right airline and then we’ll start paying some dividends.”

AirAsia started distributing profits to shareholders in 2011 after retaining earlier earnings to finance expansion. It proposed yesterday a special dividend of 18 sen per share, in addition to a final payout of 6 sen a share.

The company’s dividend policy is “part of our plans to give more certainty every year to shareholders the expected payout ratio,” AirAsia Chief Executive Officer Aireen Omar said in a separate statement yesterday.

India Venture

The carrier, which has ordered more planes to accelerate expansion, plans to start an airline in India with partners including the Tata Group, following similar ventures in Japan, the Philippines, Thailand and Indonesia.

CIMB Group Holdings Bhd. upgraded the stock to outperform, the equivalent of a buy rating, with a share estimate of 3.10 ringgit, analyst Raymond Yap wrote in a report today. UOB-Kay Hian Holdings Ltd. also raised its recommendation to buy with a price target of 2.85 ringgit, according to a note today.

“We expect AirAsia to be re-rated following the announcement of a formal dividend policy,” UOB-Kay Hian said in the report.

AirAsia placed an order for 100 additional Airbus A320 aircraft in December, including 36 current-generation A320s and 64 fuel-efficient A320neos. The group will take delivery of four A320 aircraft in the first quarter of this year, the company said yesterday. It will deploy two in Malaysia and one each in Japan and Thailand, the carrier said.

Jet kerosene prices averaged $126.91 a barrel in Singapore trading in the fourth quarter, compared with $124.73 a year earlier, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.