Unlocking the value of Capital A’s non-aviation assets

Thursday 08 Oct 2026

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This article first appeared in The Edge Malaysia Weekly on April 28, 2025 - May 4, 2025

CAPITAL A Bhd’s (KL:CAPITALA) non-aviation assets are in focus as value unlocking is at play. The budget airline is selling its short-haul aviation business to medium-haul affiliate, AirAsia X Bhd (KL:AAX).

With the impending divestment of its aviation business, Capital A’s portfolio would be refocused to become a technology and logistics company. This move is part of the group’s restructuring plan, under which both the aviation and non-aviation businesses will benefit from a sharper focus. The disposal is expected to be completed in May.

The non-aviation businesses include Asia Digital Engineering Sdn Bhd (ADE), Teleport Commerce Malaysia Sdn Bhd, BigPay Malaysia Sdn Bhd, Santan, Move Digital Sdn Bhd (AirAsia Move) and branding unit Capital A International (CAPI).

Based on analyst estimates, the six non-aviation units have a combined value of between RM5 billion and RM6.5 billion. The disparity in the valuation underscores how differently the analysts value each of the businesses.

Nevertheless, there appears to be a consensus that ADE — Capital A’s maintenance, repair and overhaul (MRO) unit — and logistics arm Teleport are poised to be key growth drivers for the group. While Teleport was not profitable in the most recent financial period, analysts maintain that it has strong growth prospects.

Mahesh: We need funding to expand our infrastructure, not for working capital. (Photo by Mohd Izwan Mohd Nazam/The Edge)

ADE, along with Capital A’s online travel agent platform AirAsia Move, were the two non-aviation businesses that contributed the most to Capital A’s non-aviation profit after tax (PAT) of RM162 million for the financial year ended Dec 31, 2024 (FY2024).

Worth of non-aviation businesses

A sum-of-parts (SOP) valuation approach points to a significant increase in the value of these non-aviation segments, highlighting their importance to Capital A’s future growth trajectory.

Analysts put a valuation of between RM900 million and RM1 billion for ADE, which currently provides MRO services to 70% of AirAsia’s fleet and other airlines.

In a March 3 note to clients, Kenanga Research estimated ADE’s value at RM900 million, which implied a multiple of 10 times its FY2025 price-earnings ratio (PER) estimate.

A relevant peer comparison would be SIA Engineering Co Ltd — the MRO arm of Singapore Airlines Ltd — that currently trades at a PER of 16.8 times UOB KayHian’s projected earnings for its financial year ending March 31, 2026 (FY2026), UOB KayHian says in a report on Feb 17.

With the aviation industry gradually recovering and the demand for aircraft maintenance on the rise, ADE’s expertise and established infrastructure are expected to translate to significant revenue and profit growth, thereby bolstering its valuation.

For instance, despite being at the tail end of achieving full operational status for its new hangar lines, ADE still achieved a notable revenue growth of 27% in FY2024, analysts observe.

In contrast, AirAsia Move experienced a revenue decline of 19% year on year (y-o-y) in FY2024.

However, analysts note that AirAsia Move is developing new revenue streams such as duty-free offerings, and upgrading its technology to improve user experience — all of which may contribute positively to its future valuation.

Meanwhile, Kenanga Research provides a SOP valuation for Capital A’s digital assets, excluding ADE, at RM996.8 million. This is significantly lower than Maybank Investment Bank Research’s (Maybank IB Research) RM5.49 billion valuation.

Kenanga Research says its valuation is based on a 30% discount to Axiata Group Bhd’s (KL:AXIATA) Boost, considering their similarities as digital platforms in the same region. The research firm also acknowledges that AirAsia’s digital assets are not directly comparable to Boost and takes into account the decline in technology start-up valuations.

In a March 3 report, Maybank IB Research values Teleport at RM1.07 billion. Although still loss-making as of FY2024, Teleport narrowed its net loss to RM24 million, while its earnings before interest, taxes, depreciation and amortisation (Ebitda) soared 215% y-o-y to RM90 million.

Analysts foresee continued expansion in Teleport’s valuation, fuelled by rising shipment volumes and strategic partnerships. They note that Teleport has capitalised on the burgeoning e-commerce market and the increasing demand for efficient cargo and last-mile delivery services across Southeast Asia.

Kenanga Research says Teleport saw a fourfold increase in capacity utilisation from key aviation partners and improved service levels, significantly boosting Ebitda in FY2024.

Despite the promising growth of its non-aviation businesses, Capital A’s overall FY2024 performance has been affected by factors such as foreign exchange losses and lower-than-expected yields in the aviation segment. The group reported a net loss of RM475.11 million for FY2024 compared to a net profit of RM255.32 million in FY2023. This was despite the full-year revenue of continuing operations rising 17% to an all-time high of RM1.5 billion, compared with RM1.28 billion.

PN17 status casts shadow over airline’s ability to raise funds

Capital A’s Practice Note (PN) 17 status — a classification for financially distressed listed companies on Bursa Malaysia — casts a degree of uncertainty over the non-aviation expansion, particularly concerning fundraising.

Analysts acknowledge the significant weight PN17 carries on the ability of the group’s non-aviation businesses to secure funds through the capital markets, private placements or borrowings. The ability of these ventures to attract substantial funding for further expansion hinges significantly on Capital A’s success in demonstrating sustained profitability and ultimately exiting the PN17 classification.

However, ADE CEO Mahesh Kumar disagrees with this assessment.

“The banks right now are really interested [in offering us loans]. Of course, if Capital A is out of PN17, it helps. But on the MRO side, it doesn’t affect us,” he tells The Edge in an interview. Mahesh, 39, was appointed to his current role in September 2020.

“We need funding to expand our infrastructure, not for working capital. As long as the banks have good security on the facility, they shouldn’t be worried, and on top of that, demand far exceeds supply in the MRO industry,” he adds.

Still, Mahesh is careful to highlight the difference between the airline business and MRO.

“In the past, most bankers thought that if the airline industry was volatile, the MRO business would be too. That is not true.”

Capital A is aiming to complete the aviation business disposal and exit PN17 status by the second quarter of 2025.

On Feb 28, Capital A disclosed its internal targets for FY2025, with ambitious goals for both its aviation and non-aviation segments. It expects its non-aviation revenue to hit RM4 billion with an Ebitda of RM600 million, giving the group a 10% net operating profit margin.

Meanwhile, its aviation segment is targeted to achieve RM24 billion in revenue, an Ebitda of RM4.8 billion and a 5% net operating profit margin, assuming all aircraft are airworthy.

Still, until the group can consistently show positive financial performance, the PN17 label will likely remain a considerable hurdle in accessing capital markets and securing favourable borrowing terms, analysts say.

MRO outfit ADE seeking to raise up to RM250 mil for expansion

Asia Digital Engineering Sdn Bhd (ADE), the maintenance, repair and overhaul (MRO) arm of Capital A Bhd (KL:CAPITALA), is seeking to raise RM200 million to RM250 million to fuel its expansion in Asean, as it aims to become the region’s largest aircraft MRO service provider, according to its CEO Mahesh Kumar.

He says ADE will pursue a dual financial strategy, combining debt financing and private placement to raise the funds. In 2023, the company had secured a US$100 million investment from OCP Asia Ltd, which was used for the construction and operationalisation of its 14-line aircraft maintenance hangar facility in Sepang. However, the company did not fully drawdown the investment, leaving US$30 million reserved for future needs.

Mahesh hopes to finalise another private placement this year.

“The proposed capital to be raised is intended to finance strategic acquisitions that will expedite the company’s regional expansion,” he tells The Edge in an interview.

At the heart of ADE’s growth strategy is a significant expansion of its operational capacity, with plans to increase its hangar capacity from the current 16 lines to 40 within the next two to four years.

Mahesh says such expansion is to cater to the strong industry demand, including that beyond Capital A’s own aircraft fleet. Currently, the company provides maintenance services for aircraft models such as the Airbus A320 and A330, as well as the Boeing 737.

“You’d be surprised, even with [our] 16 hangar lines we are still not doing 100% of AirAsia’s [MRO work] yet. We are doing around 70% only. This underscores the significant growth potential ADE is poised to capture.”

ADE has set its sights on opportunities in Indonesia, the Philippines and Thailand, targeting existing MRO businesses to gain immediate access to established infrastructure, skilled personnel and valuable certifications.

“We are in the midst of due diligence for another merger and acquisition exercise in Indonesia, also one in the Philippines and another in Thailand. For starters, we will be prioritising Asean countries,” says Mahesh.

These acquisitions will enable ADE to diversify its service offerings, expand its customer base, and solidify its competitive position across Asean, he adds.

Closer to home, Mahesh says ADE is looking to expand at the Kuala Lumpur International Airport (KLIA), adding that plans are underway for the leasing of an additional 30-acre plot from airport operator Malaysia Airports Holdings Bhd (MAHB).

This follows a previous agreement announced at the Singapore Airshow in 2022 that MAHB would allocate the first 25 acres for 14 additional hangar lines.

Mahesh provided an update on the progress of the new land development, stating that the company is “currently doing soil testing”. These land acquisitions are crucial to ADE’s infrastructure development, enabling the construction of new hangars, workshops and support facilities necessary to accommodate its growing operations.

“To be the biggest MRO player in Asean, [apart from the acquisitions], we are targeting to build another 20 lines on the additional 30 acres of land at KLIA,” says Mahesh.

Demand outstrips supply

Mahesh dismisses concerns over aggressive expansion or competition.

“At the moment, in the MRO business, we don’t really worry about competition because demand is way outstripping supply.”

To underscore this point, he adds, “Our slots for the next 12 months are fully taken up”, highlighting both ADE’s strong order book and the prevailing high demand within the MRO sector.

ADE has demonstrated a steady financial trajectory, with revenue growing nearly 30% to more than RM720 million in the last financial year ended Dec 31, 2024 (FY2024). Earnings before interest, taxes, depreciation and amortisation stood at RM140 million, while net profit was RM72 million, down 24% year on year after increased interest and depreciation costs.

Mahesh says the company projects a minimum revenue growth of 20% for FY2025, fuelled by the escalating demand for MRO services and its expansion. He also estimates a 20% profit margin achievable for the current year.

Perhaps the financial performance lends credence to Mahesh’s perspective on the favourable market dynamics within the MRO industry.

ADE’s growth narrative is not solely defined by physical expansion, as the company is also making substantial investments in digital innovation to optimise operational efficiency.

A cornerstone of this digital drive is the development of a digital marketplace for aircraft spare parts, encompassing an inventory valued at US$240 million (RM1 billion), adds Mahesh.

“This initiative is designed to streamline supply chain management, minimise aircraft downtime and ensure the ready availability of critical components,” he says.

In addition, ADE has introduced “Elevate”, an advanced aircraft health monitoring system. By leveraging predictive analytics and real-time data, Elevate optimises maintenance schedules and reduces turnaround times, further enhancing ADE’s service delivery.

Mahesh acknowledges the inherent challenges within the MRO industry, notably talent retention and the imperative for process standardisation across diverse operational environments.

To proactively address the talent gap, ADE is investing in the establishment of its own engineering school, aimed at cultivating a pipeline of skilled professionals to support the industry’s growth.

Meanwhile, ADE is actively pursuing the US Federal Aviation Administration’s approval to complement its existing European Union Aviation Safety Agency certification, a strategic move that will enhance its global recognition and broaden its service reach.

“The process of obtaining the MRO certification is equally tough as getting an airline operating licence,” says Mahesh.

ADE’s long-term strategic vision includes a potential public listing, a move that would further solidify its position in the market and provide access to additional capital for future growth.

Mahesh expresses his commitment to the company’s journey, stating his intention to lead ADE through this transformative phase.

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