KUALA LUMPUR (Feb 23): AirAsia Group Bhd surged as much as 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 its substantial shareholder.
At 11.15am, the counter pared some gains at 91.5 sen, still up 10 sen or 12.27%.
The counter, among the most actively traded stocks, saw 144.52 million shares changed hands.
Meanwhile, AirAsia X Bhd, the low-cost long-haul affiliate of AirAsia Group, was the second most actively traded stock this morning.
AirAsia X, which saw 296.3 million shares traded, rose 1.5 sen or 18.75% to 9.5 sen.
It was reported yesterday that Choi pumped in RM114.46 million to take up AirAsia’s private placement.
Choi through his private vehicle Positive Bloom Ltd acquired 167.1 million shares, or a 4.17% stake, in AirAsia on Feb 18, raising his shareholding in the airline to 332.5 million shares or an 8.96% stake.
AmInvestment Bank Research said in a note today, it is unknown at this point of time if Choi is just a passive investor in AirAsia or he will bring value to the table.
The research house, however, maintained a "sell" call on the stock.
It now projected a narrower FY21 forecast loss per share of 24.6 sen (versus 27.3 sen previously) and a lower FY22 forecast earnings per share (EPS) of 6.2 sen (versus 6.6 sen previously), having reflected the impact from the first tranche of a private placement.
“Consequently, we reduce our fair value by 6% to 62 sen (from 66 sen) for AirAsia based on 10 times revised FY22 forecast EPS. At 10 times, we value AirAsia at a discount to its global peers, Ryanair and Southwest Airlines (19 times to 49 times forward price to earnings ratio) to reflect AirAsia’s relatively smaller size,” it said.
AirAsia recently completed the first tranche of its proposed private placement comprising 369.8 million new shares or 11% of its pre-exercise share base at an issue price of 67.5 sen that raised proceeds of about RM250 million.
To recap, AirAsia has proposed a private placement of up to 669.4 million new shares, which is equivalent to 20% of its previous share base at an indicative issue price of 68 sen per share. It plans to raise RM454 million proceeds from the exercise, mainly earmarked for working capital.
“Based on our estimates, the fresh capital shall turn AirAsia’s net debt (including lease liabilities) and net gearing (including lease liabilities) of RM11.8 billion and 10 times as at September 2020 to RM11.4 billion and 6.9 times,
“Assuming the deal is to be completed, we estimate the new shares will further dilute its FY22 forecast EPS by another 5%, and reduce our fair value to RM0.59 based on the same valuation basis,” said AmInvestment Bank Research.
The research house is only mildly positive on the latest development in AirAsia.
“We see it as a stop-gap measure to bring itself back from the brink. Depending on how soon Malaysia and the world at large are to emerge from the pandemic, AirAsia may need to raise more fresh capital, including potentially a debt-to-equity swap for creditors (that is also highly dilutive to its existing shareholders) to ensure its long-term survival,” it said.
While the prospects for the air travel industry and airlines have improved significantly following the large-scale rollout of Covid-19 vaccines globally, it is still mindful of the urgent need for airlines, including AirAsia, to recapitalize their balance sheets.