Can fresh funds revive Avillion?

LOSS-MAKING Avillion Bhd has been in the news as new substantial shareholders have emerged.

Will their entry pave the way for some kind of recovery in this ailing company?

This week, the son of an Indonesian coal billionaire acquired a 9% stake by buying Avillion shares on the open market, paying around RM9.25mil for that block.

It is strange though that the price David Low Yi Ngo paid – around seven sen a share – was higher than the four sen a share offered in a recent private placement undertaken by Avillion.

This is all the more puzzling given that one of Low’s associates subscribed to 15% of that placement.

So, why didn’t Low’s money – or even part of it – go into the company through the placement instead?

The RM9.25mil that Low spent buying Avillion shares in the open market could have gone a long way toward fixing the hotel and property company – and it is indeed in need of a big fix.

Avillion has struggled with persistent losses for nearly a decade.

Its auditors continue to flag going concern risks, as the company has posted net losses every year from financial year 2016 (FY16) through FY25.

It carries significant borrowings of RM77.4mil against a cash holding of only RM5.2mil.

Its debt ratios are high, and its interest coverage ratio is worryingly low.

Most recently, its external auditor raised doubts about the group’s ability to continue as a going concern, citing FY25 net losses of RM8.84mil and a negative cash position of RM8.96mil.

Nevertheless, the recent 25% share placement raised gross proceeds of RM11.32mil, earmarked for hotel refurbishment and maintenance, repayment of bank borrowings, and working capital requirements.

Avillion does hold quality hotel assets that could be turned around.

Its crown jewel – the Avillion Hotel in Port Dickson – has a book value of RM150mil, which exceeds Avillion’s current market capitalisation of RM113mil.

It is left to be seen whether management, supported by this new injection of capital, can turn things around for this long-struggling company.