Asia Aviation shares drop on capital increase, restructuring

Shares of Asia Aviation (AAV), the operator of Thai AirAsia, fell over 7 per cent on Wednesday after announcing capital increase and business restructuring plans.

AVV fell to 2.78 baht, down 7.3 per cent from its prior closing, before settling at 2.86 baht by midday trading, still down 4.67 per cent.

The company will increase around 14 billion baht of capital by issuing new 8 billion ordinary shares via Private Placement, Right Offerings, and Convertible Bonds, it reported to the Stock Exchange of Thailand late Tuesday.

If the fundraising is successful, AVV aims to use it to repay outstanding debts and for operating capital, the statement said. AVV will also hold all of the shares in Thai AirAsia after the restructuring.

Amnart Ngosawang, an analyst at KTB Securities, said in a research note that the plan was sound and would give increased cash flow to the airline at a time when the tourism industry was recovering.

However, he noted that “the outlook is more positive in the long term” as the share price will likely be pressured by the dilution effect and high losses in the second half of the year. The dilution is the loss in existing shareholders’ ownership percentage of a company from issuing new equity.

KTB forecast losses of 6.6 billion baht for AVV for the entire 2021.

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