Q3. AirAsia Group Bhds share price fell more than 3% in Bursa Malaysia morning trade today after the budget airline announced yesterday its proposed rights issue of redeemable convertible unsecured Islamic debt securities (RCUIDS) to raise up to RM1.02 billion to finance the companys operations and business expansion. At 10:04am today, AirAsia Groups share price pared gains at 86 sen after falling as much as three sen or 3.39% to 85.5 sen. Yesterday, AirAsia Group said in a Bursa filing that the company proposed to undertake the renounceable rights issue of up to RM1.02 billion in nominal value of seven-year RCUIDS with a nominal value of 75 sen each on the basis of two RCUIDS with one free detachable warrant for every six AirAsia Group shares held. AirAsia Group said that "under the maximum scenario, the proposed rights issue would entail an issuance of RM1.02 billion in nominal value of RCUIDS, representing the issuance of 1.37 billion RCUIDS together with 682.71 million new warrants. Under the minimum scenario, the rights issue will entail an issuance of RM974.51 million in nominal value of RCUIDS, representing the issuance of 1.3 billion RCUIDS together with 649.68 million new warrants, according to AirAsia Group. In a note today, TA Securities Holdings Bhd analyst Tan Kam Meng wrote that TA Securities advises AirAsia Group shareholders to subscribe for their rights securities and participate in AirAsia Groups recovery post Covid-19 pandemic. MIDF Amanah Investment Bank Bhd analyst Ummar Fitri wrote in a note today that the price for each AirAsia Group RCUIDS at 75 sen, which is a discount to the existing market share price of AirAsia Group, is expected to encourage investor participation in the corporate exercise. Ummar said the 8% profit rate per annum for the RCUIDS is attractive with detachable warrant exercisable into new shares of AirAsia Group. He said existing AirAsia Group shareholders who do not participate in the corporate exercise will see some dilution in their shareholdings.

(a) Calculate AirAsia Group Bhdstheoretical ex-rights price (TERP). (10 marks)

(b) Calculate the value at which the rights are likely to be traded. (2 marks)

(c) An investor with 120,000 shares of has contacted you for investment advice. She is undecided whether to take up the rights issue, sell the rights or allow the rights offer to lapse. Evaluate each of the options being considered by the investor. (12 marks)

(d) Briefly explain why AirAsia Group Bhds right issues are made at a discount. (4 marks)

(e) Briefly explain ONE (1) advantage of rights issue to AirAsia Group Bhd. (2 marks)