Budget carrier AirAsia said in an exchange filing in April this year, it will sell 559mil units of shares at RM1.84 apiece to Tune Live Sdn Bhd, an investment holding owned by AirAsia co-founders Tony Fernandes and Kamurudin Meranun. The airline has obtained the approval from Bank Negara Malaysia, yesterday.
 
The approval on the share base increase does not impact Macquarie Equities Research’s (MQ Research) valuation and hence maintaining their outperform call on AirAsia. Read on excerpts from report below.

Event
 

• Bank Negara Malaysia (BNM) has given its approval for the offshore funding of the two company founders' subscription of 559m shares. The RM1bn capital injection will be completed within 60 days from today.

‌Impact

• This announcement does not impact MQ Research’s estimates nor valuations as they have factored in the increased share base in May 2016.

• Recall that in April 2016, the company announced that its two founders, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, would be increasing their stake from 18.9% to 32.4%, via a private placement (559mn shares @ RM1.84). Shareholders approved the transaction at an EGM held in May 2016. The BNM approval obtained today was the final condition precedent for the share issuance.

• The proceeds were previously announced to be utilised as follows: 34% to pre-pay debt, 27% for capex, 10% for AirAsia's new headquarters and the balance for general working capital.

 
‌Action and recommendation

• Outperform maintained.

Source: Macquarie Research - 1 Dec 2016