THE securing of an 80% guaranteed loan of up to RM500 mil from Danajamin Nasional Bhd is a welcome boost to AirAsia Group Bhd’s overall fundraising strategy to address its cash flow requirements.
Along with the group’s renounceable rights issue of up to RM1 bil which is expected to be completed in December 2021, the budget carrier will have sufficient liquidity and working capital to ramp up its operations when interstate and international borders re-open in the near future, according to PublicInvest Research.
“The RM500 mil club facility together with other funding and monetisation exercises would have raised RM2.1 bil within AirAsia Group’s guidance of RM2 bil to 2.5 bil range in new capital,” justified the research house in a company update.
“Nonetheless, we understand the group continues to explore other available funding options and/or corporate exercises to ensure sufficient liquidity and further strengthen its capital structure.”
The loan which comes under the Danajamin Prihatin Guarantee Scheme – part of the country’s economic stimulus package following the unprecedented COVID-19 outbreak – has been approved by AirAsia Group’s lenders under a club deal term financing scheme with guarantees provided via Syarikat Jaminan Pembiayaan Perniagaan (SJPP), a wholly-owned entity of the Finance Ministry (MOF).
The financing is earmarked for working capital purposes, hence will support staff costs and key operating expenses such as aircraft maintenance and fuel costs.
All-in-all, PublicInvest Research reiterated its “neutral” call on AirAsia Group with an unchanged target price of 86 sen even as it acknowledged that the company’s share price has moved up recently on optimism surrounding resumption of travel.
To note, Malaysia is looking at allowing interstate domestic travel and international travel when 90% of its adult population is fully vaccinated. The rate stands at 88% as of Oct 4, according to the Health Ministry (MOH).
Meanwhile, MIDF Research noted that AirAsia Group’s fundraising efforts are on track to ensure that it has sufficient liquidity to get back on its feet.
To recap, the budget airline has completed two tranches of its private share placement exercise in 1Q CY2021 in which it has raised RM336.5 mil from the issuance of 470.2 million new shares. The remaining 198.2 million shares will be issued by the year end.
Meanwhile, BigPay, an AirAsia digital portfolio company, has managed to secure up to US$100 mil from South Korean conglomerate, SK Group.
“AirAsia Group has also proposed to undertake a renounceable rights issue of up RM1.02 bil in which the issuance and listing applications have been submitted to the Securities Commission and Bursa Securities,” added MIDF Research.
As a whole, the research house retained its “sell” rating on AirAsia Group with a target price of 77 sen as it is still of the view that the company’s current valuation is beyond what it deems as fair.
At 10.50am, AirAsia was up 1 sen or 0.89% to RM1.13 with 18.17 million shares traded, thus valuing the company at RM4.4 bil. – Oct 6, 2021
