KUALA LUMPUR, Feb 23 — AirAsia Group Berhad's share price rose this morning after real-estate magnate Stanley Choi increased his equity in the Malaysian low-cost carrier.
The Edge reported the increase to be 13.5 sen or 16.56 per cent to 95 sen, and by 11.15am the counter pared some gains at 91.5 sen, still up 10 sen or 12.27 per cent.
This was after 144.52 million of AirAsia's shares changed hands, with the group being one of the most actively traded stocks. The group's low-cost long-haul affiliate AirAsia X Berhad was the second most actively traded stock this morning.
AirAsia X saw 296.3 million shares traded, leading it to rise by 1.5 sen or 18.75 per cent, to 9.5 sen.
Yesterday Choi, a renowned poker player in Hong Kong, pumped in RM114.46 million to take up AirAsia’s private placement.
Earlier on February 18 and through his private vehicle Positive Bloom Ltd, Choi acquired 167.1 million shares, or a 4.17 per cent stake, in AirAsia. This raised his shareholding in the airline to 332.5 million shares or an 8.96 per cent stake.
The group recently completed the first tranche of its proposed private placement, consisting of 369.8 million new shares or 11 per cent of its pre-exercise share base, at an issue price of 67.5 sen that raised an estimated RM250 million.
AirAsia also proposed a private placement of up to 669.4 million new shares, which is equivalent to 20 per cent of its previous share base at an indicative issue price of 68 sen per share, as it plans to raise RM454 million from the exercise which is to be set aside as working capital.
In a note today, AmInvestment Bank Research stated that it remains to be seen at this point of time if Choi is just a passive investor in AirAsia or he will bring value to the table, adding that it will maintain a “sell” call on the stock.
It has also revised its projection, anticipating a narrower FY21 forecast loss per share of 24.6 sen, compared to its previous projection of 27.3 sen. The research house also predicted a lower FY22 forecast earnings per share (EPS) of 6.2 sen, compared to the previous projection of 6.6 sen.
“Consequently we reduced our fair value by six per cent to 62 sen, from 66 sen, for AirAsia based on 10 times revised FY22 forecast EPS.
“At 10 times, we value AirAsia at a discount to its global peers, Ryanair and Southwest Airlines which are 19 times to 49 times respectively forward price to earnings ratio, to reflect AirAsia’s relatively smaller size,” it said.
Based on AmInvestment Bank Research's estimates, the fresh capital will turn AirAsia’s net debt including and net gearing including all lease liabilities of RM11.8 billion and 10 times as at September 2020, to RM11.4 billion and 6.9 times.
“Assuming the deal is to be completed, we estimate the new shares will further dilute its FY22 forecast EPS by another five per cent, and reduce our fair value to RM0.59 based on the same valuation basis,” it said.
The recent developments are perceived by the research house as being mildly positive for AirAsia, as it is a stop-gap measure to bring the group back from the brink.
“Depending on how soon Malaysia and the world at large are to emerge from the Covid-19 pandemic, AirAsia may need to raise more fresh capital, including potentially a debt-to-equity swap for creditors to ensure its long-term survival,” it said, adding that the swap is also highly dilutive to its existing shareholders.
AmInvestment Bank Research reminded AirAsia and other airlines of the urgent need to recapitalize their balance sheets, even as the prospects for the air travel industry and airlines have improved significantly following the large-scale rollout of Covid-19 vaccines worldwide.