KUALA LUMPUR: AirAsia X Bhd (AAX), the loss-making long-haul affiliate of low-cost carrier AirAsia Bhd, plans to raise RM500 million via a rights issue and a private placement to shore up its balance sheets, according to a source close to the matter.

The proposed rights issue is expected to be discussed and approved in a board meeting that will be held today. 

The meeting will be chaired by AirAsia (fundamental: 1.3; valuation: 1.8) founder and group chief executive officer (CEO) Tan Sri Tony Fernandes, who is due to return from the 2015 annual meeting of the World Economic Forum in Davos, Switzerland.

“The proposed rights issue would be carried out on the basis of one new share for every two existing shares held to raise around RM400 million.

“There is also a proposed private placement of some 10% of the enlarged issued and paid-up share capital of AAX to raise another RM100 million,” said the source. 

If approved, these two corporate exercises will raise about RM500 million and the money would be used to shore up the company’s balance sheets for a good one year at least, added the source.

AAX (fundamental: 0; valuation: 0.3) saw its net loss for the third quarter ended Sept 30, 2014 (3QFY14) widen 84.8% to RM210.85 million from RM128.79 million in 2QFY14, on higher operating expenses, foreign exchange losses and finance costs. It was its fourth consecutive quarterly loss since 4QFY13.

The airline is due to announce its 4QFY14 financials next month, and analysts are upbeat that the airline can return to profit due to lower fuel prices that coincides with the seasonally peak fourth quarter for 2014.

AAX is also undergoing management changes with its CEO Azran Osman-Rani, rumoured to be on his way out since last year, serving his leave pending a replacement, said the source.

He added that Benyamin Ismail, who was previously group head of investor relations for AirAsia, has filled a new position of deputy CEO of the airline.

Another top official, AAX chief financial officer Chew Eng Loke, is also likely to leave the company, said the source, adding that talk is also rife that a former promoter of the initial public offering (IPO) of AAX in 2013, Robert Milton, would come in as group CEO of AAX. 

Neither AirAsia nor AAX responded to questions posed by The Edge Financial Daily at press time.

AAX, which operates Airbus A330s mainly on routes to Australia, China and Japan, has seen its shares plunge 46% from its IPO price of RM1.25 a share while the benchmark stock index has risen 1.6% since July 2013.

AAX shares closed 2 sen or 2.9% lower at 67 sen yesterday to give it a market capitalisation of RM1.6 billion, while AirAsia shares closed flat at RM2.77, with a market capitalisation of RM7.74 billion.

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. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in The Edge Financial Daily, on January 29, 2015.