Capital A shares lower after posting its biggest loss

KUALA LUMPUR, Dec 1 ― Capital A Bhd shares were lower at mid-morning today after posting its biggest loss following its third quarter ended September 30, 2022 (Q3 2022) results announcement despite maintaining a positive outlook for the forthcoming year.

At 11.30am, Capital A fell 2.5 sen to 56.5 sen with 6.27 million shares traded, giving it a market capitalisation of RM2.33 billion.

In a filing with Bursa Malaysia yesterday, Capital A's Q3 2022 net loss widened to RM901.31 million from RM887.00 million a year ago due to one-off items and unrealised foreign exchange losses despite a revenue jump to RM1.96 billion against RM295.89 million previously.

Hong Leong Investment Bank Research said it expects Capital A’s recovery momentum to continue in the coming quarters for financial years 2023 (FY2023) and 2024.

The research house said the turnaround would be driven by capacity expansion in tandem with increasing air travel demand, declining jet fuel price trend and the softening US dollar.

It said Capital A's Practice Note 17 issue would be addressed with the disposal of Aviation Group to AirAsia X Bhd.

“Therefore, we maintain a 'buy' call with an unchanged target price (TP) of 88 sen on improving air-travel outlook,” it said in a research note today.

PN17 stands for Practice Note 17/2005. It is issued by Bursa Malaysia to companies in financial distress. PN17 companies must submit their proposals to the approving authority to restructure and revive their financial positions to maintain their listing status.

Meanwhile, Kenanga Research projects Capital A's system-wide revenue seat km (RPK) to grow 52 per cent to 35 billion in FY2023, after having recovered by 19 billion to 23 billion in FY2022 based on its forecasts.

“Capital A's digital segment is expected to remain loss-making. The AirAsia Super App is expected to grow, underpinned by a continued resurgence of travel demand from the reopening of borders and tactical campaigns, alongside expected growth from AirAsia Food, Ride and Xpress.

“Additionally, Teleport is expected to continue expanding throughout 2022 as it adds new international lanes and delivery hubs,” it said.

Kenanga said it widened the company’s net loss forecast for FY2022 to RM3 billion from RM2.1 billion as it cut revenue seat km. It will however keep its FY2023 assumptions and earnings forecast.

“We maintain our TP of 60 sen based on FY2023 forecast earnings and reiterate our 'market perform' call on Capital A,” it added.

MIDF Research maintained its 'neutral' call on Capital A, with a revised TP of 59 sen from 61 sen previously.

It revised the company’s estimated losses for FY2022 to RM2.79 billion from RM2.04 billion previously.

It also revised its forecast net loss for FY2023 to RM885.7 million from a previous net loss forecast of RM286 million.

As for FY2024, it has a profit forecast of RM353.7 million against a previous profit forecast of RM787 million.

“Among the potential tailwinds for the aviation business is the jet fuel price which is trending lower, the strengthening of Asean currencies against the US dollar and the return of the China market,” MIDF Research added. ― Bernama