KUALA LUMPUR (Oct 24): Capital A Bhd’s (KL:CAPITALA) share capital reduction plan would strengthen its financial position and aid the company’s broader restructuring efforts, said an industry consultant and a sell-side analyst.
The proposed move — which involves reducing equity without returning capital to shareholders — would be the last leg in Capital A’s quest to exit the Practice Note 17 (PN17) status slapped on the company since January 2022, said Public Investment Bank.
“We are positive with the restructuring plan as it outlines a clear pathway to turn around its operations,” the research house said.
The plan would offset and wipe out up to RM6 billion of Capital A’s accumulated losses once the company completes the sale of its AirAsia low-cost aviation business to sister company AirAsia X Bhd (KL:AAX).
The proposal was announced on Wednesday alongside the termination of a business combination agreement between Aetherium Acquisition Corp and Capital A International (CAPI).
The deal was originally meant to facilitate a listing on Nasdaq through a special purpose acquisition company (SPAC), aimed at monetising Capital A's branding business. However, Capital A scrapped the agreement after Aetherium received a delisting notice from the exchange operator in June 2024.
The capital reduction would depend on timing and market conditions, which if successful, may lead to Capital A paying dividends again, according to Shukor Yusof, who mainly consults for the aviation sector.
Further, the appetite for SPAC listings, especially those backed by private equity and venture capital, has seen a sharp decline, he said, flagging lower investor appetite for risk, the overall decline in initial public offerings and weakened performance in several private markets.
The last dividend from Capital A was 90 sen per share for the financial year ended Dec 31, 2019 (FY2019) before the Covid-19 pandemic.
For the six months ended June 30, 2024 (6MFY2024), Capital A posted a net loss of RM545.73 million on revenue of RM10.1 billion. As of end-June, the company had accumulated losses amounting to RM12.87 billion, with a negative total equity of RM11.24 billion.
On Thursday, shares of Capital A dipped 1.5 sen, or 1.52%, to 97.5 sen as of 10.51am, giving the company a market capitalisation of RM4.19 billion. The stock was among the most actively traded, with about 20.76 million shares changing hands, above its 200-day average trading volume.