Capital A Bhd proposed USD1 Billion Nasdaq listing could be a positive development, if the group is able to pull it off, said Kenanga Research.
In its Company Update today (Nov 2), the research house highlighted its thoughts following Capital A’s proposal to list a unit, which is the licensee of the AirAsia brand, via a special purpose acquisition company (SPAC), on NASDAQ at a USD1b (RM4.77b) valuation.
Regardless of whether Capital A is able to pull this off, Kenanga upgrades its MARKET PERFORM from UNDERPERFORM after the recent
weakness in its share price.
It also maintains its earnings forecasts and TP of RM0.84 as its valuation is now fair after the retracement in Capital A’s share price, with no adjustment to TP based on 3-star ESG rating.
“We maintain our forecasts pending more details upon the signing of a definitive agreement,” it said.
The research house elaborated, Capital A has entered into a letter of intent (LOI) with Aetherium Acquisition Corp (GMFI), a special purpose acquisition corporation (SPAC) listed on the Nasdaq in the United States.
“The proposal entails the acquisition of the entire 100% stake in Capital A International (CAPI) by GMFI that will result in the group becoming a new publicly listed company on NASDAQ.
“Both parties intend to complete the negotiation three months from the letter of execution of intent. We are positive on this latest corporate
development by Capital A, which will form part of the proposed regularisation plan to lift it out of the PN17 status.
Specifically, Kenanga added, the group will setup a new company called CAPI which in turn will acquire 100% stake in Brand AA Sdn Bhd, the entity that has the rights to collect royalty fees from AirAsia Aviation Group Limited (AAAGL), the exclusive licensee of the AirAsia Brand for AAAGL’s aviation related business and its leasing business (primarily responsible for the procurement and delivery of the requisite aircraft for the aviation group).
“CAPI will be a new investment and strategic development company that leverages the “AirAsia” brand and capitalises on core capabilities in aviation, travel and hospitality and digital technologies, becoming a standalone publicly traded company in the US, with 100% equity interest in AirAsia brand and leasing.
CAPI, the research house said intends to generate revenue from brand royalty and the leasing of aircraft, including in tactical acquisition, incubation and partnerships to provide platforms for entrepreneurs.
“The proposed business combination will be at an indicative equity value of USD1b (RM4.77b) based on an independent valuation of the AirAsia brand. The group is expected to register a gain arising from this corporate exercise.
“For illustration purposes, assuming RM1b gain from this corporate exercise, our SoP-TP is expected to be raised by 27% from RM0.84 per share to RM1.07 per share.
It added, the consideration is expected to be via issuance of shares in GMFI and shall be determined and mutually agreed prior to signing of the final agreement.
“Consequently, there are potential earnings leakages or losses to the group from revenue and potential profit contribution from the royalty
income from the use of the AirAsia Brand,” it said.
