Capital A made an announcement of a Proposed Business Combination involving GMFI acquiring all the issued and outstanding share capital of a joint entity called CAPI, leading to CAPI’s debut as a new publicly listed company on NASDAQ. GMFI will assign a value of approximately USD1.00b (RM4.77b) to CAPI for the purpose of the merger and this valuation will also take into account any additional net cash proceeds received by CAPI.
MIDF sees the merger as one component of the Group’s larger strategy to address and uplift its PN17 status. It presents an
avenue for the Group to unlock the value of the AirAsia brand. It will also provide the group with exposure to the U.S.
capital markets via NASDAQ, which are generally known to be more receptive to financial endeavors of this nature.
The expected impact of the Proposed Business Combination it said will be disclosed in a detailed announcement when the
Definitive Agreement is signed tentatively in 1QCY24. Capital A will no longer generate revenue and potential profits
from AirAsia Brand royalties. After the Proposed Business Combination is finalised, anticipating a pro forma gain from
this merger, it should improve the Group’s shareholders’ equity which stood at -RM10.20b as of 2QFY23. Moreover,
post the completion of the merger, the Group will have the opportunity for indirect participation in the profits of the
disposed business through its ownership of consideration shares and consideration securities.
The implementation of the Proposed Business Combination depends on the approval of the Group’s board of directors
and shareholders at an Extraordinary General Meeting (EGM), in addition to obtaining the necessary approval from
Bursa Securities for the Group to execute its proposed regularisation plan, among other considerations.
The house-made no changes to its earnings estimates.
MIDF maintains NEUTRAL on the stock with unchanged TP of RM0.90 (based on 8x FY24F EPS) as it is trading close to
its pre-pandemic mean. Key catalysts for potential growth would be a faster-than-expected return of the network and
capacity to pre-Covid levels
