KUALA LUMPUR: AirAsia Group Bhd's disposal of its 32.67 per cent stake in AirAsia (India) Ltd will help improve the group's dire cash position, MIDF Research said.
MIDF Research said similar to closure of AirAsia Japan, the announcement on AirAsia India was long anticipated.
AirAsia India was never a profitable venture to the group and non-core market for AirAsia, the firm said in a report today.
"Management disclosed that the cash proceeds will be utilised as working capital in the first quarter (Q1) of 2021.
"Noteworthy to highlight, the group cash balances stood at RM618.2 million, based on Q3 2020 result last November."
MIDF Research added that with burn rate circa RM200 million per month during the nine month period of 2020, any additional cash generated would be a boon to the group.
Yesterday, AirAsia announced that its wholly-owned AirAsia Investment Ltd (AAIL) was disposing of its 32.67 per cent stake in AirAsia India to Tata Sons Private Ltd (TSL) for US$37.66 million (RM152.58 million).
In a filing with Bursa Malaysia, it said AAIL had entered into a share purchase agreement (SPA) with the India-based TSL, which already owned 51 per cent interest in AirAsia India.
AirAsia said the proposed disposal would result in a gain on disposal of RM152.58 million in Q4 of 2020 at both AAIL and consolidated group levels.
MIDF Research said AirAsia's management had earlier indicated a conservative estimate that the group needed capital of between RM2 billion and RM2.5 billion to tide it over comfortably until end of financial year 2021.
It said in Malaysia, AirAsia was securing commitments from banks under Danajamin Prihatin Guarantee Schemes while their Philippines and Indonesia entities were in various stages of bank loan applications.
"There are talks on capital raising on equity market but so far nothing is concrete yet, except there is urgency to the exercise as management wanted to complete the bulk of fundraising by end of January 2021," it said.
MIDF Research has downgraded AirAsia to "sell" with an unchanged target price of 68 sen.
"We believe the recent ascension of the share price might overshoot the valuation level that we deem fair for the company as of now.
"With potential rights issue exercise on the horizon, dilution to investors shareholdings seems inevitable," it said.