More fundraising may be needed for AirAsia

Raising cash: An AirAsia passenger jet is seen in Kuala Lumpur. The airline has fixed the issue price for the first tranche of its private placement at RM0.675 per placement share to raise RM250mil. ─ Reuters

PETALING JAYA: AirAsia Group Bhd may need to go through another few rounds of fund-raising exercises to raise cash for its operations.

However, MIDF Research said the fundraising will expose its current shareholders to more potential dilution in the future.

“Furthermore, with other (units) under the group in similar distress, it is probable that the group will step in to inject liquidity to maintain the respective units’ capital adequacy, ’’ the research house said.

It added that the Philippines and Indonesian entities were currently in various stages of bank loan applications.

AirAsia on Wednesday said it had fixed the issue price for the first tranche of its private placement at RM0.675 per placement share to raise RM250mil.

The full placement exercise is expected to raise gross proceeds of up to RM451.51mil, the research house added.

A large portion of the amount raised or about 62% is for working capital expenses and fuel hedging settlement.

About 17% of the fund will be allocated to grow the group’s digital pillar via AirAsia Digital’s subsidiaries in line with the group’s strategic pivot to become a digital lifestyle company.

Though the exercise brings a sigh of relief to the cash-strapped company, MIDF said the exercise only served as a stopgap measure to partially address the group’s financial concerns.

Essentially, the group’s capital needs are about RM2bil-RM2.5bil to tide it over comfortably until the end of financial year 2021.

No changes to its earnings estimates were made.

The same applies to its target price of 37 sen per share.

“We believe the recent ascension of the share price might have overshot the valuation level that we deem fair for the company as of now, ’’ the research house said.

It believes that although recovery for the aviation sector and air travel is expected to gradually take place in 2021, it remains an uphill battle for the group in the current pandemic-laden operating environment.

The key risks to its call are the worsening pandemic and stricter movement control orders imposed on air travel, and a further round of equity fundraising.