AirAsia X (AAX) announced that it has fixed the issue price for its 1-for-1 rights issue and special issue at RM0.28 per share, which will raise up to RM166m for working capital. This is the minimum amount the Group had intended to raise for its turnaround plan. While more would have been welcome, allowing the Group to jump-start its refreshed operations a lot further, we still view this development positively as it will also mean less dilution for existing shareholders as the previous plan was a 9-for-5 exercise at an indicative 40sen per share. We keep our earnings forecasts unchanged, with the lower amount raised not expected to materially affect its hybrid cargo-passenger business model. Our TP is also unchanged at RM1.30, based on ex-all ~4x FY23E EV/EBITDA. We reiterate our Outperform call on AAX.

• Issue Price fixed at RM0.28. AAX announced that it has fixed the issue price for its 1-for-1 rights issue at RM0.28 per share, which will raise up to RM116m with a similarly priced special issue to raise RM50m from the Proposed Share Subscription by a special purpose vehicle (SPV). The rights issue price of RM0.28 represents a 32% discount to the theoretical ex-all price of RM0.412, calculated based on last traded price of RM0.60.
  To recap, in Dec 2020, AAX announced that it had intended to raise a minimum of RM100m and a maximum of up to RM300m through a Proposed 9-for-5 Rights Issue, and additional issuance and allotment of new shares to a Special Purpose Vehicle (SPV) to raise between RM50m and RM200m. In addition, the SPV will also be given an option to subscribe to an additional 15% of the enlarged total number of AAX shares after the Proposed Rights Issue and Proposed Share Subscription. All approvals for the fundraising exercises have been obtained.

• Outlook. While AAX still recorded losses in the recent quarter in the absence of scheduled flights, it has narrowed its core net losses sharply to RM11.3m by flying three planes for cargo and charter flights. As air cargo becomes a new growth area for the Group, AAX intends to ramp up its cargo business with a target of seven planes to be fully operational by the end of the current quarter, and eleven planes by end of Oct 2022. Management is also in the midst of discussions with lessors to lease four additional planes for the preparation of scheduled passenger flights. To note, Australia has just opened up its borders to all vaccinated tourists on Monday, 21 Feb 2022. Cargo and charter flight revenue is expected to continue to grow as more aircrafts are brought back into service, boosted by passenger flight revenue once international markets re-open.

Source: PublicInvest Research - 22 Feb 2022