Thai Airways (TAWNF) Is Risky, Best to Avoid the Penny Stock

The coronavirus pandemic wreaked havoc on many industries, but airlines and tourism were one of the worst-hit. This caused many airlines to seek bankruptcy protection. Thai Airways was also hit very hard due to the pandemic and is seeking a debt restructuring plan amid its bid to turn profitable. The stock skyrocketed on May 11 ahead of Thailand’s cabinet vote. What is Thai Airways' (TAWNF) stock forecast and will it rise more?

Thai Airways is facing renewed concerns as a new wave of infections around the world has brought the travel to a standstill yet again. 

TAWNF stock has been decimated amid the pandemic restrictions. Recently, the stock skyrocketed as the restructuring talks gained steam. TAWNF stock hit a 52-week low of $0.063 on May 6. Since then, the stock has surged by 230 percent in just a matter of three trading days. On May 11, the stock soared by 109 percent to $0.209. The stock is still down 95 percent from its 52-week high level.

Thai Airways' creditors were supposed to vote on its debt restructuring plan on May 12 but they delayed the vote by about a week, according to Bloomberg. The company needs more than 50 percent of the creditors to accept the plan.

TAWNF stock is an OTC stock. Since it has been reduced to a penny stock, no Wall Street analyst covers it. However, the forecast for the stock will depend on how the debt restructuring vote goes. If creditors approve the company’s plan, it could get a fresh lease on life to at least try to make another go at profitability. 

Until last year, Thai Airways was a state-owned carrier. After its privatization, the Thai government is under no obligation to offer financial assistance to the airways. Some of the government officials think that Thai Airways should be reinstated to a state-owned airline. Currently, the finance ministry isn't planning to recapitalize the company. A lot of the company’s forward path would depend on how the state-owned versus private structure goes and creditors' vote. While the government isn't expected to reinstate the company to state-owned status, creditors are expected to approve the rehabilitation plan. 

Approval of a rehabilitation plan would give the company a go at profitability. It's looking to defer its bond repayment for six years and a waiver on unpaid interest. Thai Airways is also seeking to raise 50 billion baht in new capital, reduce its workforce, and sell the property to help return to profitability. If the company is able to survive the current rehabilitation proceedings, it could see a short-term spike. However, given the company’s history of mismanagement, it's doubtful whether it will still be profitable four years down the line. 

Thai Airways' survival depends on the approval of its restructuring plan by its creditors. The initial response to the proposed restructuring was favorable. However, if creditors reject Thai Airways' plan, the company probably won't survive. Chansin Treenuchagron, the airline's acting president, mentioned, “If the creditors reject the plan, THAI is unlikely to survive. But if they vote in support, there will be an inflow of new cash which will boost its chances of survival.”

TAWNF is a penny stock. By nature, penny stocks are volatile and TAWNF isn't an exception. Currently, the company's survival chances depend on creditors' vote. Even if the creditors approve the plan, Thai Airways will have a long and winding road ahead to profitability and thriving. If the COVID-19 infections keep on rising, the airlines might struggle even after the approval of the restructuring plan.

Thai Airways wasn't managed well even before the COVID-19 pandemic. The history of mismanagement doesn’t offer much confidence in management’s ability to turn the company around from the current crisis. In the run-up to creditors' vote, the stock has already surged and makes the case of a downside more probable.