KUALA LUMPUR: Research houses are anticipating a strong turnaround for Capital A Bhd
in the fourth quarter of 2024 (4Q 2024), given the seasonally stronger demand and yields, lower jet fuel price and a weakened US dollar.
Hong Leong Investment Bank Bhd said the strong turnaround is also expected to come from the newly launched Asia Digital Engineering’s 14-line hangar in Kuala Lumpur International Airport.
"Despite the short-term difficulties, we believe Capital A will turn around, leveraging strong air travel demand in the region.
"We expect further potential upside to our target price (TP) should its Practice Note 17 (PN17) regularisation plan be successfully executed,” it said in a note today.
The research house has maintained a "Buy” for the stock with an unchanged TP of RM1.68, based on the implied valuation of RM6.8 billion for the aviation business and assuming RM2.15 billion for non-aviation segments.
Meanwhile, Public Investment Bank Bhd said the group is well-positioned to capitalise on the growing regional travel demand with the group’s restructuring plan outlining a clear pathway to turn around its operations.
"While the results are below our and consensus full-year estimates, we see stronger prospects moving forward, supported by a stronger ringgit, lower jet fuel prices and robust air travel demand,” it said.
Kenaga Investment Bank Bhd continued to like Capital A as a beneficiary to the recovery in air travel post-pandemic. The investment bank likes its growing digital business, strong branding and dynamic and visionary leadership which should help steer it out of the current financial difficulty.
However, it is "mindful” of its PN17 status, it said.
Capital A fell into Bursa Malaysia's PN17 category of financially distressed entities in January 2022.
On the positive side, the group’s net profit for the third quarter ended Sept 30, 2024, made a significant turnaround, reaching RM1.64 billion against a net loss of RM102.75 million a year ago, while its revenue climbed by 17 per cent to RM4.93 billion versus RM4.23 billion previously. - Bernama
