Capital A Berhad reported a core LATAMI of -RM585.1m in 4QFY23, resulting in a total core LATAMI of – RM696.0m for FY23. This undershot projections, surpassing both local investment house MIDF’s and consensus full-year loss estimates by a significant margin which was due to higher-than-expected operating expenses.
Core losses widened quarter-on-quarter and year-on-year due to increased operating expenses. With 87% of the fleet in operation, capacity rebounded to 76% of 2019 levels. Robust travel demand sustained an 88% load factor, with domestic flights at 92% and international flights at 84%. BigPay remains the sole non-aviation entity facing losses, likely due to investments made for enhancement. Despite this, losses have been narrowing, and management foresees it becoming
profitable by year-end. Sequentially, revenue increased by +14.8%qoq following the reactivation of 5 additional aircraft.
The elevated maintenance costs linked to aircraft reactivation could start to normalise later this year. Management said it plans to gradually reactivate 14 more aircraft throughout FY24. Their target is to recover 83% of pre-Covid capacity levels by 1QFY24 and at least 90% by endFY24. The load factor is projected to remain healthy at about 88% or higher, exceeding pre-Covid levels of 84%. The Group foresees a favourable competitive environment, with reduced competition in Malaysia following the exit of MyAirline. The focus is on scaling up domestic capacity, while internationally, they plan to expand capacity on routes to India and China, capitalising on visa-free arrangements.
MIDF is keeping a neutral outlook on the group and made several adjustments to earnings, primarily by increasing operating costs, updating the full-year figures, and aligning estimates with the management’s guidance. Consequently, the house has also revised its FY24F/FY25F earnings estimates by -5%/-7%, and target price is now lower at RM0.74 (from RM0.80).
The primary catalyst remains the potential for a faster-than-expected restoration of network and seat capacity to pre-Covid levels.
