KUALA LUMPUR (Nov 29): Capital A Bhd (KL:CAPITALA) slid in early trade on Friday after the aviation group's third-quarter results, which were mainly boosted by forex gains, came in below most analysts' expectations.
Shares of Capital A shed over 7% or eight sen to RM1.01, valuing the company at RM4.6 billion.
Hong Leong Investment Bank (HLIB) in a note on Friday said Capital A reported core loss after tax and minority interest (Latmi) of RM143.4 million for the third quarter of financial year 2024 (3QFY2024), which dragged the nine-month period of FY2024 (9MFY2024) to a loss after tax of RM119.5 million.
"We deem the results below HLIB’s expectation (profit after tax and minority interest [Patmi] was RM754.9 million), but still within consensus (Patmi RM459.0 million)," the research house said.
HLIB anticipate a significantly stronger 4QFY2024 performance on the back of higher fleet capacity, seasonally stronger demand, and seasonally higher yields.
Meanwhile, a drop in jet fuel prices, depreciated USD vs regional currencies, and commencement of new ADE hangars are also expected to help boost performance.
"We have excluded EIs (exceptionals) of RM1.2 billion gain in 9MFY2023, mainly attributed to RM1.5 billion forex gain for the group, offset by deferred tax losses," it said.
Quarter-on-quarter, HLIB noted Capital A's core Latmi worsened to RM143.4 million versus RM57.6 million due to continued seasonally weak quarter for yields, and higher costs.
"Furthermore, ADE MRO (maintenance, repair and overhaul) turned into losses due to capacity expansion of six new hangars, resulting to high start-up costing," it added.
HLIB said the disposal of Capital A's aviation business to AirAsia X Bhd (KL:AAX) is pending court approval and the transaction is expected to be completed in 1QFY2025.
"It exiting PN17 (Practice Note 17) is expected post-disposal exercise, alongside shareholder and court approval in 1HFY2025," it said.
HLIB maintained its "buy" call on Capital A with an unchanged target price of RM1.68, based on an implied valuation of RM6.8 billion for the aviation business and assuming RM2.15 billion for non-aviation segment.