EVA Airways Corp’s (EVA, 長榮航空) latest plan to raise funds through issuing new shares might lower its debt level, but dilute its earnings per share (EPS), according to the an industry report issued by UBS Investment Research.
EVA, the nation’s second-largest airline, on Monday announced that it planned to issue 600 million new shares and would use the proceeds to refinance debts and improve its financial structure.
The 600 million new shares include 60 million shares for public investors and 60 million shares for internal staff, and a balancing amount will be allotted for existing shareholders.
EVA has not finalized the price of the new shares. The company’s shares closed 0.64 percent higher at NT$15.75 on the Taiwan Stock Exchange yesterday.
The new equities are expected to boost the carrier’s registered capital to NT$38.5 billion (US$1.26 billion), while lowering its debt ratio by between 2 percentage points and 3 percentage points from its current 75 percent.
“We estimate the share issuance could raise as much as NT$9.6 billion, we also believe the issuance will come at a discount,” UBS director of Asia Transport Research Eric Lin (連沛?) said in a report.
Lin said the carrier’s new shares could dilute EVA’s EPS this year by as much as 4.9 percent, while reducing the carrier’s net debt-to-equity ratio.
UBS forecast the carrier’s EPS would reach NT$0.41 this year.
In the first half of this year, EVA posted a net loss of NT$789.35 million, or a NT$0.24 loss per share, based on the company’s stock exchange filing.
Separately, EVA announced on Monday that it would write down its financial asset value by NT$1.6 billion, which represents 3.8 percent of the carrier’s book value.
UBS maintained its estimates of the company’s earnings, pending the release of further details by the company.
Overall, the company’s short-term prospects may improve on the back of strong passenger volume momentum, seasonal lift in cargo volume and depressed jet fuel prices, Lin said.
UBS said it remained cautious about the carrier’s long-term outlook as competitions and global cargo overcapacity continue to pressure yields.
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