The airline yesterday proposed to place 668.4 million new shares or 20% of its existing outstanding shares.
Based on an indicative price of 68 sen, the proposed private placement is expected to raise gross proceeds of up to about RM454.4mil.
The proceeds are expected to be utilised for fuel hedging settlement, aircraft lease and maintenance payments, AirAsia Digital and general working capital expenses.
The research house, which has an "underperform" recommendation on the stock, maintained its target price at 38 sen on an unchanged 1.07x FY21 book value of equity per share.
Kenanga expects AirAsia to face a tough operating environment already derailed by widespread travel disruptions due to Covid-19 and hits from lower load factor.
"In an effort to reduce operating expenses, the group has undertaken cost cutting measures such as right sizing of manpower, salary cuts for management, staff and directors, negotiation of deferrals with lessors, suppliers and partners, and restructuring of fuel hedging positions," it said.
It added that in Malaysia the group is securing commitments from banks for the government guarantee loan under the Danajamin Prihatin Guarantee
Elsewhere its Philippines and Indonesia entities are currently in various stages of bank loan applications.
In addition, AirAsia has on-going deliberations with a number of parties for joint ventures and collaborations that may result in additional third-party investments in specific segments of the group's businesses.