[Click eStock] "Jeju Air, Large-Scale Capital Increase Presents Opportunity to Increase Holdings... Target Price Downgraded"

[Asia Economy Reporter Myung-hwan Lee] Daishin Securities announced on the 30th that it maintains a buy rating on Jeju Air but lowers the target price by 34.6% from the previous 26,000 KRW to 17,000 KRW. Although a short-term stock price decline is inevitable due to the recently announced rights offering, it was also advised to view this as an opportunity to increase holdings.

Jeju Air announced a rights offering worth 320 billion KRW on the 26th. The planned number of shares to be issued is 27,234,043, with a planned issue price of 11,750 KRW per share. The rights offering will proceed through a shareholder allocation followed by a general public subscription for any unsubscribed shares. Jeju Air stated in its disclosure that the purpose of the capital increase is to raise funds for facilities.

Daishin Securities judged that Jeju Air’s recent rights offering is intended to pay for 40 B737-Max aircraft. Jeju Air decided to introduce 40 B737-Max aircraft in November 2018. The total order amount was 4.4 billion USD (approximately 5.94 trillion KRW). Although it planned to introduce about 6 to 7 new aircraft annually over seven years from 2020 to 2026, the delivery schedule was delayed due to COVID-19.

Daishin Securities expects that the B737-Max aircraft, which will be introduced sequentially from 2023, will mostly replace existing leased aircraft. The B737-Max offers extended flight range and time compared to existing models, making it easier to develop new medium-haul routes, while its higher fuel efficiency enables fuel cost savings.

Daishin Securities advised that this rights offering announcement can be seen as an opportunity to increase holdings. Although a short-term stock price adjustment is inevitable due to the rights offering announcement, the turnaround in performance from the second half of 2022 through 2023 should be considered. Researcher Yang Ji-hwan of Daishin Securities stated, "While the decision to introduce the delayed aircraft was unavoidable, there is also a positive outlook for the operating environment in 2023, making it feasible."

This content was produced with the assistance of AI translation services.