KUALA LUMPUR (Nov 2): Capital A Bhd was among the top actives on Bursa Malaysia after the group announced that it was seeking a listing of its AirAsia brand royalty business and aircraft leasing unit in the US by injecting these operations into a Nasdaq-listed special purpose acquisition company (SPAC) at a tentative valuation of US$1 billion (RM4.76 billion), as part of its financial regularisation plans.
At the time of writing, the counter was the ninth most briskly-traded stock on the local bourse with 26.3 million shares traded, surpassing its 200-day trading average of 18.45 million.
The counter hit an intra-morning high of 87.5 sen, up 6.06% or 5.5 sen from its closing price of 82.5 sen on Wednesday.
At the time of writing, the stock retreated to 82.5 sen, giving it a market capitalisation of RM3.46 billion.
Under the deal, Capital A will set up a Cayman Islands entity known as Capital A International (CAPI) which will be merged with SPAC Aetherium Acquisition Corp (GMFI).
CAPI will acquire Brand AA Sdn Bhd and Fleet Consolidated Pte Ltd from Capital A. Brand AA is the registered proprietor for all the rights under the AirAsia brand.
Under a master brand licensing agreement dated May 31 this year, Brand AA has the right to collect royalty fees from AirAsia Aviation Group Ltd, Capital A’s aviation division.
Meanwhile, Fleet Consolidated will mainly focus on the procurement and delivery of the requisite aircraft for the aviation group based on the agreed allocation plan.
Capital A said on Wednesday that it would instead unlock the value of the AirAsia brand by floating the brand management business on the Nasdaq, and expects a one-off gain from the listing exercise to improve its negative shareholders' equity, which stood over RM10 billion as at June 30.
In a research note on Thursday, Kenanga Research said it had upgraded Capital A's market rating to "market perform" from "underperform", while maintaining the group's earnings forecasts and target price (TP) of 84 sen, deeming its valuaton fair after the retracement in its share price.
“We are positive about this latest corporate development by Capital A, which will form part of the proposed regularisation plan to lift it out of Practice Note 17 (PN17) status,” said Kenanga.
CAPI plans to leverage the AirAsia brand's strengths and core capabilities in aviation, travel, hospitality, and digital technologies, becoming a publicly traded company in the US. Its revenue sources will include brand royalties and aircraft leasing, with a focus on tactical acquisitions, incubation, and partnerships to provide platforms for entrepreneurs, according to Kenanga
However, it noted that there is a possibility of revenue and profit loss for the group due to potential earnings leakages stemming from royalty income from the use of the AirAsia brand.