PETALING JAYA: Analysts are maintaining their positive forecasts for aviation company Capital A Bhd
on the premise that it will achieve a turnaround.
Hong Leong Investment Bank (HLIB) Research said in a report it was maintaining its “buy” call on Capital A.
“Despite the short-term difficulties, we believe Capital A will achieve a turnaround, leveraging on the strong air-travel demand in the region.
“We expect further potential upside to our target price should the group’s PN17-regularisation plan be successfully executed,” it added.
HLIB Research has a target price of RM1.68 per share on the stock, based on the implied valuation of RM6.8bil for the aviation business and assuming RM2.15bil for non-aviation segments.
It said that Capital A returned to core profit after taxation and minority interests or Patmi of RM20.9mil in the fourth quarter ended Dec 31, 2024 (4Q24).
However, the results were below HLIB Research’s forecast and the disappointment was mainly due to a lower-than-expected fleet utilisation ratio as the group was still affected by inactive aircraft, resulting in a higher cost structure.
HLIB Research said air travel demand remains strong, and management is focusing on the China and India markets.
The group is working hard to reactivate another 17 aircraft in its fleet by the middle of this year and also take delivery of new aircraft.
Average fares are expected to stay healthy at the RM240 level, the research house said.
The aviation sector is also expected to benefit from the ringgit’s appreciation and lower jet-fuel costs this year, while restructuring its debt to lower finance costs would also help, it added.
HLIB Research also said the disposal of the aviation business to AirAsia X Bhd is pending court approval.
The transaction is expected to be completed in 2Q25, which would allow exit from the PN17-status, pending shareholder and court approval.
Meanwhile, Public Investment Research said although the aviation company’s results fell short of both its and consensus estimates for the full year, it was keeping its earnings forecasts, anticipating stronger prospects ahead.
This was supported by a stronger ringgit, lower fuel prices and robust air travel demand.
“With the group’s restructuring plan providing a clear roadmap to operational recovery, we believe Capital A is well-positioned to capitalise on the growing regional travel demand.
“As such, we maintain our ‘outperform’ call on Capital A with an unchanged target price of RM1.57,” Public Investment Research said.
Capital A’s shares closed 84 sen in yesterday’s trading.
