SEPANG (Sept 26): Capital A Bhd’s (KL:CAPITALA) maintenance business has a potential to rival the value of the low-cost airline under AirAsia Bhd, according to its chief executive officer Tan Sri Tony Fernandes.
The maintenance, repair, and overhaul arm under Asia Digital Engineering Sdn Bhd (ADE) is rapidly expanding its capacity including with acquisitions, Fernandes told a press conference after officiating the unit’s aircraft maintenance hangar here on Thursday.
“I have no doubt that ADE could be as valuable as AirAsia in a pretty short period of time,” he said.
Sprawling more than 380,000 square feet, ADE’s 14-line aircraft maintenance hangar is now one of the largest in the Southeast Asia. ADE is expected to add another 14 lines to expand its capacity to serve more clients amid growing demand for such services.
ADE is now in talks with Malaysia Airports Holdings Bhd (KL:AIRPORT) for 10 of the new lines.
“In a very short period of time, this will be the biggest hangar [in terms of] number of lines in Asia,” Fernandes said.
ADE is also in discussions with Malaysia Airports to acquire an additional 20 acres within the Kuala Lumpur International Airport for development as a centre for maintenance, repair, and overhaul activities.
The current operations — offering services catering to various models including the Airbus A320 and A330 as well as Boeing 737 — is based out of the KLIA Aeronautical Support Zone 1 under Malaysia Airports' KLIA Aeropolis development.
Too early to talk about ADE listing
There have been discussions about the possibility of a separate listing of ADE though it is still too early for such a move, said Fernandes.
“So this will be for the board to decide when [to go for listing],” he said. “We are very cash flow positive [at the moment] as we are able to raise debt to build this hangar.”
In April last year, ADE secured a US$100 million (RM473 million) investment from OCP Asia Ltd for the construction and operations of the latest maintenance hangar.
“I was asked a question at the investors and analysts [briefing] today — within Capital A companies, which one do you think would be listed first? This is just my opinion, but probably ADE would be the first listing. But it's premature to talk about listing at the moment,” he added.
Capital A is currently in the midst of fixing its finances to exit its Practice Note 17 (PN17) status, and has proposed to dispose of its entire aviation business to AirAsia X Bhd (KL:AAX). The company is seeking shareholders’ approval at an extraordinary general meeting scheduled for Oct 14.
As part of the deal, AAX will issue 2.31 billion shares to Capital A at RM1.30 apiece. Capital A will in turn distribute 1.69 billion of those AAX shares to its shareholders and be left with a projected 18.48% stake in AAX.
Other business will stay with Capital A, including ADE, in-flight caterer Santan, super app Move Digital, air freighter Teleport and e-wallet unit Big Pay.
Shares of Capital A closed up 2.5 sen or 2.82% to 91 sen on Thursday, valuing the company at RM3.90 billion.