Source: The Standard Author: Mandy Lo 03/13/2009
Subject Concerned: Opinion Airlines
Cathay Pacific Airways may need to raise cash as its gearing ratio climbed to a 20-year high, according to analysts.
They add the carrier is facing another difficult year after seeing record losses. Net debt to equity, or net gearing, jumped to 66 percent last year from 29 percent, the highest since 1988.
"The balance sheet is clearly a concern for the group and management did not rule out at a briefing the possibility of a rights issue," Citi analyst Anil Daswani said.
CLSA analyst Robert Bruce said Cathay's net debt to equity may rise to 101 percent this year because of the 22 aircraft to be delivered before 2011 and the expected 2009 operating losses.
CLSA cut its target price to HK$6.15 from HK$6.55 and forecast a net loss of HK$2.7 billion as revenue is tipped to slump 30.5 percent to HK$60.2 billion as travel demand worsens.
"A rights issue looks an increasing possibility to us as moves to raise cash by asset sales have proven difficult," said Paul Dewberry at Merrill Lynch.
"We see a remote probability of an equity-raising exercise for Cathay if net gearing remains below one time [100 percent]," Morgan Stanley analyst Chin Lim said.