AirAsia Expect 12-14% FY09F-11F EPS Dilution

To raise RM505.4m.
The proceeds would likely be mainly used to fund the Group’s working capital and future capex. The placement would enlarge AirAsia’s share base by 16% to 2,756.2m shares and dilute Tune Air’s (AirAsia’s major shareholder) stake to 26.5% from 30.7%. There are no details available on the new shareholders at this juncture but it is understood that the placement offer had received strong demand from foreign investors.

Dilutive to EPS.
Our FY09F and FY10F EPS will be diluted to 15.7sen and 13.6sen respectively (from 18.2 and 15.6 sen) due to larger share base. This raises FY09- 10 PE multiples to 9.0x and 10.4x EPS. However, the deal would also help support AirAsia’s balance sheet. We expect net gearing level to ease to 2.4x from 3.1x by end-FY09F.

Still unattractive.
We maintain our Fully Valued call and lowered TP to RM1.10 (from RM1.25), based on 8x CY10F EPS. This is after taking into account the dilutive impact on EPS following the placement. We remain concerned on the stock given its rapid fleet expansion and current high net gearing of 3.5x. AirAsia is currently trading at 10.4x FY10F EPS (ex-EI) and 1.1x FY10F BV, higher than peers’ 7.8x and 0.9x respectively.

Report From HWangDBS

14 Sept 2009 Weekly FBM KLCI Technical Perspective

Our Malaysian bourse appears to be back on track now, ready to ride on a positive trajectory to plot fresh highs for the year going forward. This comes after the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) jumped last week, climbing to a high of 1,210.36 before finishing at 1,208.28, up 29.5-point or 2.5% from the previous Friday’s close.

Rising in tandem through the week was the FBM 70 Index (+2.0%) but the FBM ACE Index ended weaker (-1.3%). Daily average volume rebounded too to 662.2m shares valued at RM1.1b, from 548.4m units worth RM981.9m previously. While trading activity should ease ahead of the long weekend break, the bulls will still want to sustain the renewed momentum generated from last week’s upbeat performance. With news flows on the domestic scene also likely to be quiet – no key data is anticipated other than the insignificant ones namely Consumer Price Index report for Aug (due on Wednesday, 16 Sep) and the international reserves as at 15 Sep (on Friday, 18 Sep) – the focus will turn to the external front for new leads to emerge.

Report From HWangDBS