The house maintains its earnings estimates for Capital A even though 3Q23 results came in slightly below expectations as it expects the group to generate a core net profit in 4Q23 as fares peak and fuel prices ease.
More importantly, Capital A stated that it is ready to announce its PN17 regularisation plan this month. With its share price
having retraced recently and yielding >10% upside potential, Maybank upgrades the stock to BUY from HOLD.
Marginally underperformed expectations, Capital A’s 3Q23 core net loss of MYR100.5m (-86% YoY, -45% QoQ) brought 9M23 core net loss to MYR570m (-77% YoY) which missed our expectations by a tad. The house had expected 3Q23 to breakeven.
The group has explained that average fuel prices rose 16% QoQ in USD terms due to geopolitical tensions while c.50% of its seats had been sold at lower fares before 3Q23 began. That said, Maybank maintains its earnings estimates as for now and expects 4Q23 to generate core net profit of c.MYR100m due to the reasons below.
Earnings estimates maintained as 4Q23 may be good
CAPITALA expects 4Q23 to be good as it anticipates average fares then to be up c.15% QoQ and average fuel prices to be lower as it is now c.USD105/bbl (3Q23 high: USD128/bbl). There is upward pressure on fares after MYAirline (Not Listed) suspended operations on 12 Oct 2023.
It also noted that bookings to and from China jumped 20% WoW after China and Malaysia eased visa requirements effective 1 Dec 2023. Curiously, CAPITALA will issue a profit forecast for FY24E next month.
CAPITAL A stated that it is ready to announce its PN17 regularisation plan which will involve AirAsia X this month. In other news, 51%-owned AirAsia Cambodia will now launch operations in Feb 2024. It is also exploring further debt financing and equity raises in 49%-owned Indonesia AirAsia and 100%-owned Philippine AirAsia.
