Air Asia X woes

From the Edge:

KUALA LUMPUR: AirAsia X Bhd (AAX) ( Financial Dashboard), the loss-making long-haul affiliate of low-cost carrier AirAsia Bhd ( Financial Dashboard), plans to raise RM500 million via a rights issue and a private placement to shore up its balance sheets, according to a source close to the matter.

The proposed rights issue is expected to be discussed and approved in a board meeting that will be held today. 

The meeting will be chaired by AirAsia (fundamental: 1.3; valuation: 1.8) founder and group chief executive officer (CEO) Tan Sri Tony Fernandes, who is due to return from the 2015 annual meeting of the World Economic Forum in Davos, Switzerland.

Air Asia X just laid a doozy on its shareholders.  Considering the marketcap of 1.5 billion, 500 million amounts to diluting their shareholders by a third.

Overestimating capacity in the industry is a no-no, as I mentioned in an earlier post.  Only those really hardy investors would wait. But its growth trajectory may have plateaued as demand is falling short of the airline's lofty expectations.  If that is the case then the shares intrinsic value is worth a lot less than what people were expecting.