KUALA LUMPUR: AirAsia Group Bhd's (AirAsia) 45 per cent owned subsidiary, Thai AirAsia Co Ltd's (Thai AirAsia) corporate and capital restructuring is seen to be positive for the low-cost carrier to raise capital via the capital market.
MIDF Research analyst Ummar Fitri said the restructuring plan might be fruitful for AirAsia's subsidiaries tapping into capital markets to raise funds on their own despite the slight shareholding dilution.
"AirAsia stakes in Thai AirAsia will be partially diluted to account for the bigger share base if the restructuring plans go through," he said in a research note today.
The research house's estimation pegged the new shareholdings to be 43.1 per cent from the previous 45.0 per cent, a small decrease in shareholding.
"We look upon the development favorably."
The listed holding company of Thai Air Asia, Asia Aviation Public Ltd (AAV), had yesterday announced the resolutions on the restructuring plan for the former.
In an exchange filing yesterday, AirAsia said AAV's board of directors had approved the resolutions of Thai AirAsia's corporate and capital restructuring plan involving a loan for a maximum amount of up to 3.15 billion baht (10 baht=RM1.31).
The restructuring plans included an initial public offering (IPO) of Thai AirAsia (liquidation of AAV and directly become Thai AirAsia shareholders), conversion of debt to equity, and a loan from an investor in the form of a convertible bond and shares offering to AAV's current executive chairman.
"We estimate the IPO proceeds potentially reached THB2.76 billion, or RM358.43 million with an additional convertible bond issued to be in the maximum amount of THB3.15 billion or RM409.5 million."
Ummar said the estimation was derived by multiplying the indicative price per share of IPO at THB20.3925 with a new number of proposed shares to be issued.
He said partial conversion of Thai AirAsia debts into shares (amounting not exceeding THB3.9 billion or RM507.0 million) will further aid the cash flow of the company.
Without upliftment of travel restrictions, Ummar said aviation players will continue to incur deepening losses.
"Partial upliftment is a positive for the sector, yet it will still be insufficient to carry the group to profitability."
He said even with the removal of travel restrictions, the return of consumer confidence will likely having a lagging effect between current low passenger traffic to full recovery.
"Therefore, reopening borders or at least easing of travel restrictions are key for the return of air passengers," he said.
Ummar said there is a fair chance for the aviation industry will see similar or even lower passenger volumes, potentially turning this year of recovery into another washout year.
"Given that Malaysian government target for 80 per cent inoculation by December 2021, the 70 per cent benchmark might only be feasible on the tail end of 2021," he added.
MIDF Research has maintained its target price for AirAsia RM0.20 sen per share at this juncture while tracking the progress of the fundraising exercises.
"We believe the recent share price might have overshot the valuation level that we deem fair for the company based on the current situation.
"We are hopeful on aviation recovery but maintain level-headedness in assessing the viability of the recovery. We reiterate our Sell call on AirAsia."
MIDF Research said the situation remains an uphill battle given that travel restrictions have not been fully lifted, although recovery for the aviation sector and air travel is expected to gradually take place in 2021.