Capital A Berhad reported core LATAMI of -RM2.42b in FY22 after stripping off foreign exchange loss of about – RM554.7m, reversal of impairment on ROU assets, and other one-off items, MIDF views the result as above expectation as it came above consensus. The positive surprise was largely due to a higher-than-expected share of profit in associates, particularly Thailand AirAsia (TAA), and better load factor for the airlines.
For quarterly, the core LATAMI was about 16.9x narrower in 4QFY22 on a yearly basis as total passengers carried of 7.8m grew by 2.9x. The performance of the aviation business was supported by higher flight frequencies with a healthy load factor of 86% as well as favourable airfares, despite being partly offset by elevated jet fuel prices. Among the non-aviation businesses, only BigPay is still in the red, but the EBITDA losses have narrowed by +12.3%mom and +38.0%yoy on the back of cost containment measures in relation to card renewal and marketing.
Notably, the turnaround in profitability of its associate was thanks to TAA having recovered its capacity and passengers carried to 72% and 75% of 4Q19 levels. On a sequential basis, core PATAMI was 9.0x narrower with passengers carried growing by +9.6%mom in tandem with year-end holidays and partly supported by easing of jet fuel prices.
Cumulatively for the 12-month period, Capital A pared down its core LATAMI to -RM2.42b (+15.5%yoy) due to the lifting of international borders. The aviation business carried 5.0x more passengers and recorded a healthy load factor of 84% for the year with 84 operational aircraft as at end-4QFY22 against 49 operational aircraft in the corresponding quarter. Only Teleport recorded a decline in revenue (-11.3%yoy) mainly due to the drop in yield with lower rates to remain competitive. However,
Teleport’s EBITDA losses were narrower by +61.3%yoy owing to lower operating cost as the logistics arm shifted to scheduled passenger belly cargo model.
In view of the results, MIDF has adjusted its FY23F/FY24F losses/earnings upwards by +49%/+39% to account mainly for higher contribution from associates, adjustments to capacity recovery to be in tandem with the Group’s fleet plan and higher load factor for the airlines. The stock is trading at a forward PE of 5.7x or at a -32% discount to its pre-Covid historical mean and as such, we upgraded our call from NEUTRAL to BUY. Key risks include: (i) delay in its full fleet activation plan, (ii) higher-than-expected maintenance costs to bring back its serviceable aircraft, (iii) lower-than-expected demand for the China market and (iv) inability to regularise its PN17 status
