KUALA LUMPUR (May 8): Shares in low-cost aviation operators Capital A Bhd (KL:CAPITALA) and AirAsia X Bhd (KL:AAX) rose in early trade on Wednesday, tracking gains at the broader market.
At 9.45am, AAX was up 2.47% or four sen at RM1.66, giving it a market capitalisation of RM742.14 million. The stock had earlier risen to a high of RM1.70. The counter was actively traded with 4.17 million shares changing hands.
Meanwhile, Capital A added 1.11% or one sen to 91 sen for a market capitalisation of RM3.87 billion. The stock had earlier climbed to 93 sen. The counter saw some 18.63 million shares traded.
Under the merger exercise announced in late April, Capital A will be divesting AirAsia Bhd and AirAsia Aviation Group Ltd (AAAGL) to AAX in a share and debt settlement deal.
The divestment is deemed a major disposal as the aggregate revenue from AirAsia and AAAGL constitute more than 70% of Capital A’s total revenue.
Therefore, Capital A is required under Bursa Malaysia’s Listing Requirement to regularise such conditions within 12 months, failing which the stock may be suspended or delisted.
In a recent note, MIDF Research maintained its “neutral” rating on Capital A at 70 sen with a target price of 74 sen and said the proposed disposals will optimise the business operations by focusing on aviation services and digital ventures that synergise with and enhance its passenger airlines business.
The research house said the proposed corporate exercises will aid the group in its transition out of its Practice Note 17 status, with a deadline of June 20, 2024, to submit the plan to Bursa.
MIDF said the management intends to begin sharing profit guidance for its digital entities during the briefing of its first quarter of financial year 2024 (1QFY2024) results.
It said the completion of the aviation disposal/acquisition is anticipated by 3QFY2024, with the regularisation plan expected to be finalised by 1QFY2025.
“We maintain our neutral stance on the stock with an unchanged target price of 74 sen (based on FY2024F EPS), as it is currently trading at its pre-pandemic average.
“Key drivers for potential earnings growth could involve an accelerated restoration of its network and capacity to pre-pandemic levels,” it said.
Meanwhile, Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng in a text message said the falling yen is positive for the aviation sector.
"More people travel to Japan now," he said.