RAISING a minimum amount in its proposed rights issue exercise to kickstart its turnaround plan augurs well for AirAsia X Bhd as this will mean less dilution for existing shareholders.
Yesterday (Feb 21), the long-haul budget airline announced that it has fixed the issue price for its one-for-one rights issue and special issue at 28 sen/share which will raise up to RM166 mil for working capital with a similarly priced special issue to raise RM50 mil from a proposed share subscription by a special purpose vehicle (SPV).
The rights issue price of 28 sen/share represents a 32% discount to the theoretical ex-all price of 41.2 sen which is calculated based on AirAsia X’s last traded price of 60 sen.
“While more would have been welcome to allow the group to jump-start its refreshed operations a lot further, we still view this development positively as it will also mean less dilution for existing shareholders (compared to the previous plan of nine-for-five at an indicative 40 sen/share,” noted PublicInvest Research analyst Denny Oh in a company update.
In December 2020, AirAsia X had intended to raise a minimum of RM100 mil and a maximum of up to RM300 mil through its nine-for-five rights issue, and an additional issuance and allotment of new shares to a special purpose vehicle (SPV) to raise between RM50 mil and RM200 mil.
In addition, the SPV will also be given an option to subscribe to an additional 15% of the enlarged total number of AAX shares after the proposed rights issue and proposed share subscription. All approvals for the fundraising exercises have been obtained.
“We keep our earnings forecasts unchanged with the lower amount raised not expected to materially affect its hybrid cargo-passenger business model,” opined PublicInvest Research.
“Our target price is also unchanged at RM1.30 based on ex-all circa four times FY2023E EV/EBITDA (enterprise value to earnings before interest, taxes, depreciation, and amortisation ratio). We reiterate our “outperform” call on AirAsia X.”
While the budget carrier still recorded losses in the recent quarter in the absence of scheduled flights, the research house said it has narrowed its core net losses sharply to RM11.3 mil by flying three planes for cargo and charter flights.
As air cargo becomes a new growth area for the group, AirAsia X intends to ramp up its cargo business with a target of seven planes to be fully operational by end of the current quarter and 11 planes by end-October 2022.
“The management is also in the midst of discussions with lessors to lease four additional planes for the preparation of scheduled passenger flights,” PublicInvest Research pointed out.
“To note, Australia has just opened up its borders to all vaccinated tourists yesterday (Feb 21). Cargo and charter flight revenue is expected to continue to grow as more aircrafts are brought back into service, boosted by passenger flight revenue once international markets re-open.”
At 10.13am, AirAsia X was down 3 sen or 5% to 57 sen with 446,600 shares traded, thus valuing the airline at RM236 mil. – Feb 22, 2022
