Tune group has potential to repeat AirAsias success.
Tune Group, the closely held parent company of Fernandes and business partner Kamarudin Meranun, may sell stock in some of the units by the end of next year, Fernandes said. Initial public offerings (IPOs) are also planned for AirAsia's Indonesian budget arm and long-haul unit AirAsia X, he said. AirAsia is the world's fastest-growing traded airline by sales in the past five years, according to data.
"Tune Money and Tune Hotels have the most potential," the Malaysian entrepreneur said in a June 14 interview.
"The financial services industry is complicated, just like airlines, and we are reaching a market that they generally missed and we are utilising AirAsia's customer base, which is huge."
The 48-year-old is targeting emerging wealth in Southeast Asia where an increasing number of its 598 million inhabitants can afford to travel and buy consumer goods such as mobile phones for the first time.
Demand for budget services has so far withstood the global economic slowdown amid a protracted crisis in Europe. AirAsia's first-quarter profit rose while full-service carriers Singapore Airlines and Malaysian Airline posted losses in the period, citing fuel costs. AirAsia's passenger numbers gained 12 per cent in the quarter as the region's slowing economic growth prompted more people to opt for budget travel.
AirAsia climbed as much as 1.9 per cent to 3.73 ringgit in Kuala Lumpur trading yesterday, its highest intraday level since June 7, before paring gains to 3.70 ringgit. The benchmark FTSE Bursa Malaysia KLCI Index rose 0.3 per cent. Tune Group is the holding company created in 2007 when the initial aviation business was extended to include hotels. It will eventually hold assets from movie production to Formula One racing and online financial services.
Southeast Asia is weathering a slump in IPOs better than markets including Hong Kong, as optimism about the region's economic outlook draws investors to offerings by companies including Felda Global Ventures, Malaysia's biggest plantation owner, and IHH Healthcare, Asia's largest Hospital operator.
Asia Aviation, the parent of AirAsia's Thai airline, has fallen 7.6 per cent in Bangkok after becoming the first subsidiary to begin trading last month.
"The best use of capital is a repeating model," said Fernandes, who has spent some of his wealth on buying a Formula One racing team and the English soccer club Queens Park Rangers.
Most of Tune's companies are designed to contribute to one another. Passengers booking flights online are offered travel insurance, budget bedrooms and prepaid mobile phone cards.
All are available and interlinked via the Internet.
Tune Hotels operates 24 budget hotels in Southeast Asia and the UK.
,with deals signed with developer partners to add another 60 properties in countries including Australia, India and the Middle East, chief executive Mark Lankester said in an interview.
While international hotel operators including France's Accor have set up economy brands such as Ibis and All Seasons to target budget-conscious travelers, they don't compete in the same bargain-bucket segment as Tune.
Tune Money, an online distributor of insurance and mutual funds, got off to a "disastrous start," said Fernandes, a trained accountant. It changed management and strategy, making about 30 million ringgit ($9.5 million) last year. "Many people who fly with us don't have insurance, don't have credit cards, don't have unit trusts."
Tune Talk is a so-called mobile virtual network operator that uses other carriers' infrastructure for its wireless phone services. It has just broken even, he said. Of three Tune units targeted for listing, fund manager Choo Swee Kee said he's most skeptical about Tune Talk.
"Its fate could be very similar to XOX, another MVNO player that wasn't very profitable at the time of listing and then the share price tanked," said Choo, who manages about 700 million ringgit as chief investment officer of TA Investment Management in Kuala Lumpur.
XOX has reported three straight quarterly losses and slid 80 percent in Kuala Lumpur since its trading debut a year ago.
Some Tune ventures have little connection to the core tourism business. Tune Studios allows aspiring singers to record albums inexpensively. Plans are under way to start Tune Live, which would organise concerts.
"All these businesses are run by different people," said Fernandes, who like his former boss Richard Branson started out in the music industry before branching into aviation and other industries. "We are no different from a private-equity fund."
Fernandes, who previously worked as financial controller for Branson's Virgin Records in London, has more time to expand these businesses after stepping down from Malaysian Air's board in April and reversing a share swap following union dissent over management's turnaround plans. Fernandes will relocate to Jakarta this month to focus on regional growth.
"When you're based in Malaysia you'll inevitably get drawn into the Malaysian operations," he said. "I'll take on the regional role."
Southeast Asia offers one of the fastest-growing markets for Tune's products. Indonesia, the region's most-populous country, has a median age of 28, compared with 36 in China, according to the Central Intelligence Agency's World Fact Book.
Tune joins furniture retailer Ikea Group and Uniqlo store- operator Fast Retailing in targeting a region where gross domestic product growth exceeds 7 per cent and its population is among the youngest in the world. The total GDP of Southeast Asia's 10 nations is $1.86 trillion, more than India, and 37 percent of its residents are under 19, according to the Association of Southeast Asian Nations.
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