IMAGINE a couple with five children trying to seal a home loan under the husband’s name but the wife refuses to be the loan guarantor for reasons best known to her, thus depriving the entire family of a roof above their heads.
Such analogy befits the dilemma encountered by Capital A Bhd (formerly AirAsia Group Bhd) which is unable to obtain the RM500 mil club facility under Danajamin Nasional Bhd’s Prihatin Guarantee Scheme as joint founders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun were not keen to become guarantors.
A Bursa Malaysia filing by the company yesterday (March 10) stated that a joint or several guarantees were required from both founders as security to Danajamin. Both Fernandes and Kamarudin control a 24.64% stake in Capital A via Tune Air Sdn Bhd 12.41% and Tune Live Sdn Bhd 12.23%.
Displeased with the “smart founders for being risk averse” and “leaving retail investors in a lurch to fence for themselves”, share price of the low-cost airline operator slipped to an intra-day low of 61.5 sen this morning before paring earlier losses to hover around 62.5 sen – down 3.5 sen or 5.3% – at the time of writing.
Investors who flocked the i3 Investor platform have reacted with fury albeit keeping their emotions in check. “The fact that both REFUSED to be guarantors means business revival is slim. Coupled with the current geo-political tension, Capital A’s end is near,” commented djrock.
With oil at US$130/barrel and further upward pressure given the long-term energy mix based on new policies put in place over the last few days for Western Europe to shift away from Russian hydrocarbons, billyraycyrus dread that “there will be a prolonged plateau of oil at higher levels eating into the low cost carrier model with no end in sight”.
“Capital A’s diversification into other businesses are primarily new entries into very competitive markets, and to my best knowledge, there is no sustainable competitive advantage in any of these businesses. Happy to hear other thoughts on this,” he shared.
Cheeseburger is worried that Capital A’s emergence as a superapp player will backfire on the group in the long-term.
“Capital A’s venture into food delivery and ride hailing business … look at how Grab share price in the US has plunged to nowhere and if this pioneer or so-called Unicorn not even making money after so long, will Capital A (fare better)? It makes sense (then that) nobody would want to be a guarantor, not even the founder himself.”
In its latest assessment of Capital A, MIDF Research noted that the group’s cash holding stood at RM1.26 bil as of end-FY2021 (end-FY2020: RM533.3 mil) after going through rounds of fundraising exercises including:
- RM336.5 mil raised via private placement;
- RM974.5 mil raised via rights issue;
- Obtaining US$150 mil (RM628.1 mil) foreign loan (only US$100 mil or RM418.8 mil had been withdrawn); and
- US$100 mil (RM418.8 mil) convertible loan from SK Group for BigPay.
“Even though the plan to take out the loan has fallen through, we believe that Capital A has sufficient liquidity to last through FY2022 assuming the monthly operating cash burn stays within RM62 mil-RM70 mil,” opined the research house.
“The management is also targeting to secure another US$225 mil (RM942.1 mil) loan from foreign lenders in 1H FY2022.”
All-in-all, MIDF Research reiterated its “neutral” call on Capital A with a target price of 61 sen which was derived based on EV/EBITDA (enterprise value/ earnings before interest, taxes, depreciation and amortisation) of six times.
“We remain cautious as several of their key ASEAN markets have yet to fully reopen their borders,” noted the research house. “In addition, the rising jet fuel prices had prompted airlines including AirAsia to re-introduce fuel surcharges, making the fares relatively pricier.”
At 11.35am, Capital A was down 3.5 sen or 5.3% to 62.5 sen with 15.58 million shares traded, thus valuing the company at RM2.6 bil. – March 11, 2022
