STOCK analysts have poured cold water on the RM455 mil private placement exercise mooted by AirAsia Group Bhd yesterday.
Six research houses tracked by FocusM have retained their “dispose” rating on the budget carrier with CGS-CIMB Research revising downward its already pathetic target price of 11 sen to 8 sen.
The justification given is that AirAsia may suffer persisting huge losses due to the slow recovery from the COVID-19 pandemic while the first round of fund raising alone may not be sufficient.
“We have decided to set our new target price at 8 sen – also based on P/BV (price to book value ratio) of 1 time – but rolling forward one additional year to end-CY2022F in order to encapsulate our expectations that AirAsia will likely remain loss-making next year,” wrote analyst Raymond Yap in a company update.
“In this way, our target price more holistically embodies the negative impact of the COVID-19 pandemic on shareholder value.”
Yesterday, AirAsia announced that it will do a private placement of 20% of its current share base – the maximum allowed to under the revised Bursa Malaysia listing requirements – at 68 sen each to raise RM455 mil by end-1Q 2021F.
While it views the placement exercise as a step in the right direction, MIDF Research opined that this could only serve as a stop-gap measure to partially address AirAsia’s financial concerns.
“Recall that, management indicated a conservative estimate that the group capital needs of between RM2-2.5 bil to tide them over comfortably until end-FY2021,” noted the research house.
“We posit that the group may need to go through a couple rounds of fund-raising exercises, exposing its current shareholders to more potential dilution in the future.”
All-in, MIDF Research maintained its “sell” call on AirAsia by almost halving its target price to 37 sen from 68 sen previously.
Three other research houses have also retained their no-confidence call on AirAsia:
- PublicInvest Research: Maintained “underperform” rating with an unchanged target price of 39 sen.
- Kenanga Research: Maintained “underperform” rating with an unchanged target price of 38 sen.
- AmResearch: Maintained “sell” recommendation with a fair value of 66 sen.
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Maybank IB Research: Maintained “sell” rating with an unchanged target price of 31 sen.
At 9.35am, AirAsia was down 1 sen or 1.37% to 72 sen with 6.74 million shares traded, thus valuing the company at RM2.41 bil. – Jan 22, 2021
