Capital A to unveil PN17 regularisation plan

PETALING JAYA: Capital A Bhd is likely to announce its PN17 regularisation plan this month and submit it for approval to Bursa Malaysia next month.

The company expects to complete the implementation of its PN17 regularisation plan in the fourth quarter of 2023 (4Q23).

It aimed for the PN17 status to be lifted before year-end.

Capital A has delayed the submission of its regularisation plan upon advice from its advisers to incorporate its audited financial year 2022 (FY22) financial statements, said Maybank Investment Bank (Maybank IB) Research.

Capital A reported a net profit of RM57mil for the first quarter of financial year 2023 (1Q23). Its recovery is largely led by the faster-than-expected capacity recovery and stronger-than-expected load factor for Malaysia’s operations.

Meanwhile, TA Research said Capital A’s management during a recent analysts briefing was tight-lipped on the involvement of AirAsia X Bhd (AAX) in its PN17 restructuring, but hinted that it would involve moving some companies around without fundraising.

However, post restructuring, there would be a fund raising exercise to strengthen its balance sheet.

Maybank IB Research noted Capital A expects to carry more passengers going forward as more aircraft returned to service. While it did not deny the possibility that airfares could ease, it stressed that “this is because jet fuel prices are easing (spot: about US$90 (RM415)/ a barrel, 1Q23 average: US$105 (RM484) a barrel and this will be positive for load factors.”

Maybank IB Research also said margins, namely RASK-CASK (revenue per available seat kilometer-cost per available seat kilometer) spread, may expand as Capital A may opt to lower airfares (or raise ancillary fees) slower than the rate jet fuel prices are easing.

“Air travel demand recovery remains on track as more countries have reopened borders and relaxed travel requirements,” said Hong Leong Investment Bank (HLIB) Research, .

It noted Capital A plans to reactivate 169 aircrafts by end second quarter FY23 (2Q23), all 207 by end 3Q23 and 209 by end FY23 (from current 157).

Capital A also remains positive on the current yield environment as demand remains robust.

It guided that Cambodia operations to commence by October 2023, and is also targeting another two Asian airline operating companies.

HLIB Research adjusted its FY23 and FY24 earnings by -0.8% and +29.6% and introduced FY25 earnings at RM1.3bil.

The research house has maintained a“buy’’ call on the stock with a target price (TP) of RM1.15.

MIDF Research also maintained a “buy’’ call with a TP of RM1.00 a share.

TA Research has raised its TP to 87 a share and upgraded the stock to a “hold’’ rating.

Maybank IB Research, meanwhile, maintained its earnings estimates on Capital A with a “buy” call at a TP of 90 sen.

On the sector, MIDF Research believes a mix of international and domestic passengers should shift closer to the pre-pandemic ratio of 50:50 as local airlines expand their network and more foreign carriers explore Malaysia as viable routes.

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