Airasia triggers PN17, but won’t be classified
PETALING JAYA: Airasia Group Bhd may not be in the most favourable position when it comes to negotiation with potential new investors, said Aminvestment Bank Research.
The low-cost carrier announced yesterday that it had triggered the prescribed criteria of the Practice Note 17 (PN17) of the Main Market Listing Requirements of Bursa Malaysia but it won’t be classified as such under the PN17 relief measures.
The counter opened at 73 sen yesterday and trading was immediately suspended prior to the announcement.
It jumped to 79 sen when the suspension was lifted after the midday break and dipped to 70.5 sen at the close, 17.54% or 15 sen lower than Tuesday.
Given the depressed share price, Aminvestment Bank said a rights issue or private placement could be highly dilutive to existing shareholders.
It pointed out that Airasia had net cash of Rm1bil and shareholders’ funds of Rm1.1bil as compared to total lease liabilities of Rm12.2bil as at March 31, 2020.
Aminvestment Bank has maintained its sell recommendation on Airasia with a fair value of 41 sen, based on 6.5 times its forecast financial year 2021 (FY21) earnings per share, at a 50% discount to its global peers Ryanair and Southwest Airlines to reflect Airasia’s relatively smaller size.
“We are mindful of a potential steep downwards adjustment to Airasia’s share price in the event of a highly dilutive equity-raising exercise.
“We maintain our view that the recovery in the air travel industry will be bumpy given the uncertainties surrounding the reopening of borders and urgent need for airlines to recapitalise their balance sheets on the massive losses they have suffered amidst a collapse in air travel since the pandemic,” it said.
The research house added that the coronavirus (Covid-19) has thrown a spanner in the works to Airasia’s strategy to aggressively grow its top-line to cushion the impact of the higher cost structure following the recent sale-and-leaseback of its fleet.
In a filing with Bursa Malaysia yesterday,
Airasia said that its external auditors, Messrs Ernst & Young PLT, had issued an unqualified audit opinion with emphasis of matter on material uncertainty relating to going concern.
This was in reference to Airasia’s audited financial statements for FY19 ended Dec 31 and its shareholders’ equity on a consolidated basis is 50% or less of its share capital (excluding treasury shares).
The group’s shareholders’ equity on a consolidated basis as at March 31, 2020 was 37% of its share capital (excluding treasury shares).
“For the avoidance of doubt, Airasia will not be classified as a PN17 listed issuer and will not be required to comply with the obligations pursuant to Paragraph 8.04 and PN17 of the Main LR for a period of 12 months from the date of this announcement,” it said.
Airasia added that it would re-assess its condition and announce whether it continues to trigger any of the criteria in PN17 of the Main LR upon the expiry of the 12 months from the date of this announcement.