|SHAREHOLDERS OF ASIATRAVEL.COM have approved the placement of 500 m new shares to Zhong Hong New World International at 20 cents apiece for S$100 m in gross proceeds.
Well, it's not every day that a company gets a cash injection that far exceeds its market cap. AsiaTravel.com's market cap pre-placement was $63 million, based on share price of 18 cents.
Shareholders also approved the issue of 500 m non-listed and non-transferable warrants to Zhong Hong, a wholly-owned subsidiary of ZhongHong Holdings, which is listed on the Shenzhen Stock Exchange and has a recent market cap of about RMB14 billion.
With the share placement, Zhong Hong's stake in AsiaTravel.com rises from 11.41% to 63.49%.
Time: 10 am, 18 March 2016.
743, 5 Lorong Toa Payoh.
Here are five takeaways from the EGM:
1. This year: 40-50% of the net proceeds from the share placement will be used for advertising and promotion. The remainder is for its "expansion of operations in the PRC."
Mr Boh Tuang Poh, the executive chairman of AsiaTravel.com, said the money would be utilised fully in the current financial year. And the key target market is China, not surprisingly.
With a significant war chest to create consumer awareness and win sales, Mr Boh said that AsiaTravel.com will be able to realise better the revenue potential of its IT infrastructure, product range and unique selling points which have evolved significantly over the years.
To blow S$40-50 million a year on A&P is not exactly out of this world. Some bigger competitors work through far bigger A&P budgets every year, said Mr Boh.
2. What about the money for A&P after year 1? Mr Boh said that the A&P dollars will generate revenue which will be rolled forward to support the next year's A&P efforts.
And then there's always the possibility of Zhong Hong exercising the 500 m AsiaTravel.com warrants that it now holds. At the exercise price of 24 cents apiece for 400 m warrants and 30 cents for 100 m warrants, the conversion could bring in another S$126 million in gross proceeds into AsiaTravel.com.
3. Revenue jump: AsiaTravel.com will likely see its revenue rise substantially -- or "exponentially," in Mr Boh's words -- from the heavy A&P targeting mainland Chinese holidaymakers and holidaymakers in this region heading to mainland China. The A&P is not a branding exercise; instead the emphasis is on generating near-term, if not immediate, sales.
4. Free-and-easy travellers: AsiaTravel.com has identified free-&-easy holiday makers as the consumer segment where it can win big. There is "no obvious player" which has offerings covering their entire spectrum of needs --- air tickets, hotel rooms and tour packages, and even car rental. In China, as is the case elsewhere, people are increasingly turning away from group tours and opting for free-and-easy (but packaged) tours.
When completed over the next few years, ZhongHong will become the owner of roughly 100,000 hotel rooms, and AsiaTravel.com (being a majority-controlled subsidiary) will become its key marketing arm for the inventory.
AsiaTravel.com will be the one to wholesale this inventory of rooms to other travel agents while keeping a portion for itself for direct sale to its online consumers -- at the best price, of course, in the market.
Thus, AsiaTravel.com will see further explosive growth in its business.