CAPITAL A Bhd is still besieged by post-pandemic turbulence as revealed by its latest 1Q FY2022 financial results for the period ended March 31, 2022.
Although its revenue more than doubled to RM811 mil from both its aviation and digital business as travel restrictions were relaxed across the region, Kenanga Research said Capital A incurred a core net loss to RM851 mil in its 1Q FY2022 (1Q FY2021: core net loss of M628 mil) due to stringent cost containment and the absence of fuel swap losses.
“While we expect a gradual recovery in air travel beginning 2H 2022, delayed border openings and inconsistent entry requirements for travellers may delay a stronger-than-expected tourism recovery in the short term,” projected analyst Raymond Choo Ping Khoon in a results review.
“However, further easing of travel restrictions alongside reduced quarantine requirements and better testing procedures will support a strong air travel revival in the coming quarters. The Thai Government has resumed its quarantine-free travel scheme from Feb 1 and lowered entry requirements from March 1.”
Pitted against such backdrop, Kenanga Research has lowered Capital A’s target price to 65 sen (from 74 sen previously) due to slower-than-expected recovery in air travel.
Moving forward, Kenanga Research is forecasting a wider net loss of RM1.57 bil for FY2022 from a net loss of RM722 mil due to the longer-than-expected air travel recovery.
For the digital segment, Kenanga Research expects the airasia Super App to grow noticeably off the back of continued resurgence of travel demand from border re-opening and tactical campaigns alongside expected growth from airasia Food, airasia Ride and airasia Xpress.
Additionally, Teleport is expected to continue growing throughout 2022 as it adds new international lanes and delivery hubs. In March 2022, BigPay fully launched the digital lending platform to provide new loan products.
Currently, BigPay Later Personal Loans is available to selected users and will be progressively rolled out to a wider base.
Meanwhile, Hong Leong Investment Bank (HLIB) Research reiterated its “buy” rating with a higher target price of 90 sen (previously 84 sen) on Capital A despite the disappointment attributable to strict lockdown restrictions across the ASEAN region and aircraft resumption costs.
Despite the higher revenue (increase in passenger traffic), the research house said reported core net loss widened 31.8% mainly due to opex on staff, maintenance (to restart flight) and jet fuel costs as well as a higher recognition of associate losses of RM143.1 mil.
With regard to the company’s Practice Note 17 (PN17) status, HLIB Research said the management was able to convince auditor Ernst & Young PLT (EY) on the group’s cash flow ability for the next two years, thus removing the auditor’s material uncertainty status.
“PN17 regularisation plans are on track which will not result in capital dilution or equity raising exercise,” noted the research house. “We believe the plans involve corporate reorganisation and partial disposal of subsidiaries or investments.”
At 10.12am, Capital A was down 2.5 sen or 3.76% to 64 sen with 7.21 million shares traded, thus valuing the company at RM2.66 bil. – May 27, 2022
