KUALA LUMPUR (February 23): AirAsia Group Bhd rose 13.5 Sen, or 16.56%, to 95 Sen this morning after Hong Kong's well-known poker player Stanley Choi Chiu Fai emerged as a major shareholder.
At 11:15 am the meter reduced some gains to 91.5 sen, still 10 sen or 12.27%.
144.52 million shares changed hands at the counter, which is one of the most actively traded stocks.
Meanwhile, AirAsia X Bhd, AirAsia Group's low-cost long-haul company, was the second most traded stock this morning.
AirAsia X, which traded 296.3 million shares, rose 1.5 Sen or 18.75% to 9.5 Sen.
It was reported yesterday that Choi injected RM 114.46 million to pick up AirAsia's private placement.
Choi acquired 167.1 million shares or 4.17% of AirAsia on February 18 through his private vehicle Positive Bloom Ltd, increasing his stake in the airline to 332.5 million shares or 8.96%.
AmInvestment Bank Research said in a note today that it is not known at this point whether Choi is just a passive investor in AirAsia or whether it will bring value to the table.
The research house, however, maintained a "sell" call for the stock.
The forecast loss per share for fiscal year 21 was now lower of 24.6 Sen (compared to 27.3 Sen previously) and lower forecast earnings per share for financial year 22 of 6.2 Sen (compared to 6.6 Sen previously) predicts what reflected the impact of the first tranche of a private placement.
“As a result, we are reducing our fair value for AirAsia by 6% to 62 Sen (from 66 Sen), based on the 10-fold revised EPS for fiscal year 22. We are evaluating AirAsia 10-fold with a discount compared to its global counterparts Ryanair and Southwest Airlines (19x to 49x the price / earnings ratio) to reflect AirAsia's relatively small size.
AirAsia recently completed the first tranche of its proposed private placement, which includes 369.8 million new shares, or 11% of its pre-exercise share base, at an issue price of Sen 67.5 and generates proceeds of approximately RM 250 million.
In summary, AirAsia has proposed a private placement of up to 669.4 million new shares, representing 20% of its previous share base at an indicative issue price of Sen 68 per share. It is planned to generate revenue from the exercise of RM 454 million, which will be primarily used for working capital.
"According to our estimates, the fresh capital will add to AirAsia's net debt (including lease liabilities) and net debt (including lease liabilities) of 11.8 billion and 10x from September 2020 to 11.4 billion and 6 , Increase 9 times.
"Assuming that the transaction will be completed, we estimate that the new shares will further dilute the EPS forecast for fiscal year 22 by a further 5% and lower our fair value to RM 0.59 on the same valuation basis", said AmInvestment Bank Research.
The research house is only slightly positive about the latest developments in AirAsia.
“We see it as a stop-gap measure to pull yourself back from the edge. Depending on how quickly Malaysia and the world at large will emerge from the pandemic, AirAsia may need to raise more fresh capital, including a possible debt-to-equity swap for creditors (which is also very dilutive for existing shareholders) to do so ensure its long-term survival, ”he said.
While the outlook for the air travel industry and airlines has improved significantly following the large-scale rollout of Covid-19 vaccines around the world, there is still an urgent need for airlines, including AirAsia, to recapitalize their balance sheets.
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