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PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 26 Nov 2021, 10:48 AM

 

AirAsia Group Berhad - New Restructuring and Recapitalisation Plan for Thai AirAsia

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Asia Aviation Plc Ltd (AAV), the parent company of Thai AirAsia (TAA) has put forward a revised financial restructuring plan to raise as much as THB17.9bn (USD535m) from new loans, share sales and convertible debt offerings to shore up its liquidity. The exercise should allow TAA to ramp up its operations amid the expected recovery in travel as Thailand gradually reopens to international travellers. Thailand plans to end quarantine requirement for fully vaccinated travellers from low-risk nations starting from 1 Nov. While we are positive on the financial restructuring plan and upliftment of travel restriction, the outcome of lease restructuring and the pace of air passenger traffic recovery remain uncertain. Therefore we make no changes to our forecasts for now and maintain our Neutral call on AirAsia Group (AAGB) with unchanged target price of RM0.86.

  • AAV/TAA Restructuring and Recapitalisation Plan. Upon completion of restructuring, AAGB’s shareholding interest in TAA will be via listed and traded shares of AAV, as opposed to holding of unlisted shares of TAA directly at this juncture. On the recapitalisation plan, AAV plans to raise a total up to THB17.9bn, of which (i) THB8.8bn will be from private share sales to AAGB for THB7.8bn (RM971.9m) and new investors for THB1.0bn (ii) THB2.2bn from sales of convertible bonds, (iii) THB3.0bn from rights offering, and (iv) THB3.9bn from loans.
  • Effects. AAGB’s stake in Thai AirAsia will be partially diluted to 40.7% from the previous 45% (refer to Table 1). AAGB’s participation in AAV’s private placement exercise of THB7.8bn (RM971.8m) would result in unrecognized losses in TAA immediately crystalizing, estimated to be RM791m, and knocking off 20sen from net earnings and net asset per share. The remaining amount (~RM180.8m) will be held as investment in associate. Financial outflow from AAGB is estimated to be RM168.6m for its entitlement under AAV’s rights offering, to be fully funded via bank borrowings.
  • Our view. We view the financial restructuring plan positively as it will help raise the necessary funding for TAA’s working capital and jump starting operations in a market heavily tourism-dependent and gradually re-opening to travellers.

Source: PublicInvest Research - 22 Oct 2021

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