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Stock market: Lion Air considers IPO, Asiana suspended
March 22nd 2019
Asiana’s re-stated operating profit is down 68%. Read More »
It was mixed news for the Asian market as Lion Air once again moots an IPO. Bloomberg and Reuters cited sources discussions were underway, and if work on an IPO proceeds, the offering will not be until after Indonesia’s presidential election next month. The valuation could be around US$1 billion, with most equity coming from offshore.
Asiana Airlines’ governance and debt ratio are under scrutiny. Korea suspended Asiana’s stock on Thursday evening after auditors PwC noted discrepancies and were unable to complete their work. Asiana re-stated financials on Friday that revised downwards the operating profit by 67.9%. The change in accounting is largely regarding costs and liabilities. Asiana’s re-stated revenue decreased by less than 1%.
The weaker figures increase Asiana’s debt ratio, which has been an ongoing concern. Asiana’s original accounts said its debt ratio declined to 701% in 2018. Its debt ratio peaked in 2015 at 991%. Exceeding a 1,000% ratio would trigger margin calls for company loans.
It is understood that the main area under scrutiny is operating leases, which is a large item for Asiana since 61% of its fleet was leased at the end of 2018. There is also disagreement about including Air Busan in consolidated figures. Asiana does not wholly own Air Busan, whose performance would boost Asiana. There was also disagreement on frequent flyer mileage liability.
It is unclear if Asiana changed accounting practices in 2018, or why these matters are only now an issue with auditors.
Asiana sister Kumho Engineering and Construction also had its stock suspended.
