It needs more money. And it is not that the company is in financial difficulties. One can read many articles to proof that but do not read into rumors. The company is generating positive operating cashflow but quite a number, especially now. However, it may not be able to generate free cashflow due to the investments it needs to make.
The problem for Airasia is Asia. Asia is a fast growing market for low costs, so much so that the owner for Vietjet can be one of the richest in Vietnam. Airasia does not produce cashflow fast enough for it to not further raise funds.
I have written several articles on Wellington and EPF sales. They were selling between its price of around RM1.30 to RM1.60. If one is to just follow the funds actions, we would be following the sale ourselves. Now, the question is with EPF selling most of their stocks at around RM1.50 and now both the founders buying at RM1.80, who would you trust most? The quantum itself is huge. It is not that both Tony and Kamaruddin are buying 2% of Airasia. It is 16.7%.
Now, the only thing I have qualms about is that they are buying cheap - not too cheap but we expect them to buy cheap - although this can be a contentious debate. Remember, the founders are not expected to buy at above market value. The fact that they decide to buy at RM1.84, in my mind, means that the founders must have thought, it could go much higher. Things are going well for airlines. Oil price are low and seems to be continuously low, Ringgit seems to be improving which is good time for Airasia to buy more planes, MAS is pulling back allowing Airasia to take up position as the largest Malaysian airline and one of Airasia's biggest market - China, with its people having huge appetite to travel.
The other thing I like about this deal is that they do not do a private placement at discount to market price and to third parties whom we do not know about (sometimes to friendly parties or can be proxies). The placement price is close to its closing price before suspension and openly to the founders. This is transparency and allows me to appreciate at how Airasia treats its minority shareholders. They are doing the right thing.
With that, I just hope that the lost of confidence over Airasia will stop and it is time for a Malaysian company to grow aggressively regional and be the finest low costs airline in Asia.
AIRASIA (5099) - Airasia's cash injection: Anything positive?
http://www.intellecpoint.com/2016/04/airasias-cash-injection-anything.html
