KUALA LUMPUR (May 14): AirAsia X Bhd (AAX) shares rose 1.67% or 0.5 sen to 30.5 sen today as selling pressure eases off after investors reacted to its fixed ex-date rights issue.

“The sudden interest on AAX shares this morning could be from the removal of selling pressure by investors yesterday which is likely a reaction from its rights issue,” said an analyst.

The stock had earlier opened at a price of 30 sen and leaped to 31 sen before settling in at 30.5 sen with 5,793,600 shares traded at 11am.

To recap, AAX (fundamental: 0.20; valuation: 0.80) had fixed the ex-date for its renounceable rights issue with free detachable warrants on May 13 and the entitlement date on May 15 this year.

The rights issue is priced at 22 sen per share, at an entitlement basis of three rights share for every four existing AAX shares. The rights issue comes with a free warrant for every two rights share subscribed, which will have an exercise price of 46 sen.

In a note by Alliance DBS Research, it said that the rights issue is expected to bring down AAX’s financial year 2015 forecast net gearing to 1.4 times. However, the research house remains wary of execution risks in efforts to turnaround AAX.

“Post-rights issue, our ex-rights target price (TP) would be adjusted to 36 sen. Book value erosion remains a concern for us, as we do not expect AAX to turn profitable in the near-term,” it said.

Alliance currently has a “fully valued” rating with an unchanged pre-rights TP of 47 sen on the stock.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)