Monday, June 29, 2015

Air Asia's dead cat bounce

Bumpy ride ahead for Airasia shareholders

When Air Asia Indonesia plane crashed last year, Tan Sri Tony Fernandez was at his finest in managing crisis. The Malaysian government and MAS or maybe now MAB have lots to learn on communication and public relations from him.

Since the expose by a Hong Kong based research company, GMT Research, Air Asia shares have been struggling. Tony F's response don't seem to be working to arrest the fall [read past posting here and here].

In fact, news report today are talking about short selling is at large. This will not be good news for AirAsia shares.

A quick look at the chart shows the emerging of a dead cat bounce pattern.

Dead cat bounce is market lingo for shares not likely to see bottom yet to have any chance in the near future of rebounding. A living cat could fall and jump back but dead cat bounce are not sustainability. The analogy is pretty much like the diagram below:

To get more technical, there will be those mumbo jumbo about retracement and percentage retracement as predictor of shares future movement. See below:

It certainly does not look good when Reuter's report the news like this:
Short-sellers target AirAsia amid questions over accounting

Published: 29 June 2015 7:07 PM

Short-sellers are targetting AirAsia Bhd amid accounting worries at Asia's biggest budget carrier, with its shares among the most borrowed securities in Southeast Asia in recent weeks, data shows.

Loaned stock for Malaysia's AirAsia rose to a high of 47 million shares on June 23 from 7 million two weeks prior to that, according to data from financial software company SunGard Astec Analytics.

That means sentiment towards AirAsia's shares, which slumped by as much as a third since June 9 and wiped off nearly half a billion dollars of the airline's market value, has worsened, despite AirAsia chief executive Tony Fernandes' recent assertions that the carrier has a solid balance sheet and business plan.

"We have seen that people borrowed the stock, which thus indicates that there are short-sellers out there taking an increasing interest in AirAsia," Madalin Prout, senior relationship manager at SunGard Astec Analytics, told Reuters.

Concerns about AirAsia came to the fore after a June 10 report by little known GMT Research said the airline uses related-party transactions with loss-making associate carriers to boost its earnings. Hong Kong-based GMT also said the carrier needed US$1.9 billion in funding.

Short-sellers sell borrowed stocks, hoping to profit by buying back them back at a cheaper price and pocketing the difference. Securities lending is seen as a proxy for short- selling.

Borrowing levels of AirAsia's shares rose to as much as 83% of the total securities available for lending, the third highest among the most liquid stocks in Southeast Asia, before easing to 69% on June 24.

This is still above the 12% average borrowing levels for Malaysian and Southeast Asian stocks.

Analysts have cut AirAsia's 2015 earnings estimates by nearly 6% on average since June 10, with 14 out of 22 brokers reducing estimates. The company's shares are down about 29% since June 9.

"We not only view AirAsia's recent updates on funding plans for associates (through convertible bonds and IPOs) with scepticism, but also argue claims of improving prospects are unvalidated," HSBC analysts said in a report dated June 22.

HSBC said the performance of AirAsia's Philippine and Indonesian ventures had to significantly improve to attract any external funding in the near term.

AirAsia did not immediately respond to an email seeking comments on the HSBC report. It has said it expects the Indonesia affiliate to break even and its Philippine business to have returned to profitability by the end of this year. – Reuters, June 29, 2015.
[Taken from TMI]
Past is past [read here], nothing vindictive. Criticism can be seen as an half empty glass or half full. If past criticism had been taken as precaution, Air Asia could have avoided much of the problems they are facing today.

Only comfort would be that news report tend to be lagged because news only report what happened. On the hind sight, everyone can talk cock and claim be an expert. At the heat of the moment, their hands turned cold to make the decision as their analytical ability to assess situation get muddled. 

Investors are not interested to know about the past. It happened already. They want to know what will happen in the future. Tony F need to give them the assurance that there is a future for Air Asia for them to hold and wait out on to their shares. That he can do but can he convince?

Investors need a true assessment of the situation. Nazir, who finally talked today [read here], would have advised Tony F on something he has been talking a lot on lately, wouldn't he?

He seem to want to advise many people except himself for the shit he created in CIMB. Hopefully his next exit is not the same cell with Xavier Justo.


maae said...

I read from a source, Tony lately, didn't respond to Air Asia problem. He rather focused on something different. Is that true ?

Hope ABTW, got that info to share. Is it something to do with Nazir, MAS ?

Or maybe Tony's close partner would tell us the story...

Capcha said...

All these are ploys to divert attention away from MAS?

AirAsia is a listed company on Bursa Malaysia.

As far as I know, it has not received any public funds in "bailouts".

Unlike MAS.

AirAsia has competed against other LCCs without asking for special protection.

There are plenty of apologists for MAS because of the "national agenda".

Yah, right.

Does the "national agenda" also involve running up losses and dipping into the public purse for sustenance?

Anonymous said...

Didn't air asia not got tax exemption value of rm1 billion from govt?

Assumption in conspiracy theory all wrong already.

Do you actually believe MAS, Khaxanah or any related grp to MAS got time to think of getting the research company to write?

They are worried of their own jobs and bonuses.

Only Tony F capable of such underhanded and dirty ways of doing things. Remember klia2. Why silence now? Proven to be wrong.... right?

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