Posted by Junglestock > 2013-02-10 12:37 | Report Abuse

MAS could survive rights issue despite low cash balance Posted on February 9, 2013, Saturday KUCHING: Malaysian Airline System Bhd (MAS) has the interest of the market as the company released a circular to shareholders to call for an extraordinary general meeting (EGM). According to the research arm of Maybank Investment Bank Bhd (Maybank IB Research), the proposed tabled at the EGM were a par value reduction of RM0.90 per share to RM0.10 per share, a share premium reduction with the objective of resetting accumulated losses to zero and a rights issue to raise a maximum RM3.1 billion. Khazanah Nasional had unconditionally committed to taking up its full entitlement commensurate with its 69.37 per cent shareholding and contributed up to RM2.15 billion. The proposed rights issue was renounceable and might be offered to the other entitled shareholders. Should the take up rate for the offer by the minority shareholders be low, Khazanah Nasional might end up holding more of MAS than the maximum of 75 per cent to keep MAS’ listing status, in which case, the circular stated that the company would endeavor to rectify the situation within the timeframe allowed by the authorities, it explained. “The proposed rights issue is extremely earnings per share (EPS) dilutive by 56 to 64 per cent. Our forecast net asset value (NA) in the first quarter 2013 (1Q13) is RM0.69 per share, implying the stock is now trading at book value. “Based on scenarios for the rights issue in the circular, we estimate that the share price needs to be more or equal to RM0.69 per share in order for the rights issue to be non-dilutive on its NA value and be attractive for the investors,” noted Maybank IB Research on the matter. The research house also stated that MAS needed a minimum cash infusion of RM1 billion to pay for pre-delivery deposits (PDP) relating to its aircraft acquisitions. This amount could be easily funded by drawing down its existing sukuk facility hinting that MAS could survive without the rights issue despite a low cash balance (source:Borneo Post)