PETALING JAYA: Capital A Bhd
continues to work towards getting itself out of Practice Note 17 (PN17) status but MBSB Research has downgraded the stock to a “neutral” from “buy.’’
It believes the stock is fairly valued but kept its target price unchanged at 95 sen a share based on eight-times next year’s earnings per share. It made no changes to its earnings estimates.
Capital A and AirAsia X Bhd (AAX) have waived the Thai Securities and Exchange Commission condition that would have required an exemption from conducting a mandatory tender offer for Asia Aviation PCL (AAV), the Thai-listed parent of Thai AirAsia (TAA).
This removes the final regulatory hurdle and materially de-risks the completion of its aviation unit disposal, the research house said.
Capital A and AAX entered into a third supplemental agreement to the AirAsia Aviation Group Ltd (AAAGL) share sale and purchase agreement (SSPA) to transfer AAAGL, the holding company for AirAsia’s short-haul airlines, into AirAsia Group Sdn Bhd (AAG).
AAG is the new holding entity that will assume AAX’s listing status and consolidate all AirAsia-branded airlines under one listed aviation group.
The amendment waives the earlier requirement to obtain a Thai exemption from conducting a mandatory tender offer for the remaining shares in AAV after the AAAGL acquisition.
The tender offer will instead be undertaken jointly with a designated Thai partner who will fully fund and assume all acceptances under the offer.
As a result, AAX’s effective 40.71% stake in AAV (held via AAAGL) will remain unchanged after the tender.
AAV will continue to be listed on the Stock Exchange of Thailand and the change in tender mechanics will not affect the operating licence or day-to-day operations of TAA.
MBSB Research said, with the Thai regulatory condition now resolved, the parties expect to declare all conditions precedent fulfilled, making the AAAGL SSPA unconditional by the end of October, which is the deadline for the airline unit disposal following the sixth extension.
Completion of the transaction is expected by December, the research house added.
The remaining steps include a RM1bil private placement, capital reduction and distribution, as well as the allotment and listing of new AAG shares.
Capital A will then proceed to file for lifting the PN17 status by year-end and is also seeking to be exempted from the requirement to record two profitable quarters, having already met the condition.
