IPO ... AirasiaX

Investment bank Morgan Stanley is expected to finalise the proposed valuation of the 10% stake in AirAsia X to be purchased by Khazanah Nasional Bhd and present it to the long-haul budget carrier's board by September 2011.

While it was too premature to put a price tag on the proposed purchase, Morgan Stanley had been appointed the deal adviser and was currently working on the deal valuation.

Khazanah will be issued new shares in AirAsia X and is expected to come in as a pre-initial public offering (IPO) investor of AirAsia X, ahead of the airline's plans to list in 2012.

In 2008, AirAsia X executed an agreement to place a 20% stake to Bahrain-based Manara Consortium and Japan's Orix Corp for US$75mil (or RM250mil). When the placement was done, it was one year after the long-haul low-cost carrier established operations. The valuation placed on AirAsia X's shares would be higher now (Aug 2011) given the growth and expansion in business experienced by the airline since.

In 2010, AirAsia X achieved a revenue of RM1.3bil with a net profit of RM80mil from carrying some 1.92 million passengers. The airline targets to touch RM2bil in revenue this year, owing to better ancillary income and higher yields, and carry some 2.7 million passengers.

AirAsia X now has a fleet of nine Airbus A330 and two Airbus A340 with a route network to 15 destinations globally.

Everything hinges on the valuation before Khazanah will look to accept the share purchase.

Khazanah's potential participation would signal the entry of a strong institutional investor into the company and would be used as a benchmark for the subsequent IPO price.

Current shareholders of AirAsia X include Aero Ventures Sdn Bhd (52%), AirAsia Bhd (16%), Corvina Holdings (10%), Orix Corp (11%) and Manara Consortium (11%) Malaysia Airlines (MAS), AirAsia and AirAsia X signed a collaboration agreement, whereby the outcome of the agreement will see MAS focus on being a full-service premium carrier, AirAsia on being a regional low-cost carrier (LCC) and AirAsia X, a medium-to-long-haul LCC.