MBSB Investment Bank Bhd (MBSB Research) has downgraded Capital A Bhd to NEUTRAL from Buy, maintaining its target price at RM0.95, citing that the stock is now fairly valued following the waiver of the final regulatory condition tied to its aviation unit disposal.
According to MBSB Research, Capital A and AirAsia X Bhd (AAX) have agreed to waive the requirement imposed by the Thai Securities and Exchange Commission (SEC) for an exemption from conducting a mandatory tender offer for Asia Aviation PCL (AAV), the Thai-listed parent of Thai AirAsia (TAA). The waiver was achieved through a new tender approach and effectively removes the last regulatory overhang, significantly de-risking the completion of Capital A’s long-awaited corporate restructuring.
The research house explained that both Capital A and AAX have entered into a third supplemental agreement to the AirAsia Aviation Group Ltd (AAAGL) sale and purchase agreement, which will see the transfer of AAAGL into AirAsia Group Sdn Bhd (AAG). AAG will take over AAX’s listing status and consolidate all AirAsia-branded airlines under a single listed aviation entity.
Under the revised agreement, the mandatory tender offer for AAV shares will now be undertaken jointly with a Thai partner who will fully fund and assume all acceptances. As a result, AAX’s effective 40.71% stake in AAV, held through AAAGL, will remain unchanged. AAV will continue to be listed on the Stock Exchange of Thailand (SET), with no impact expected on Thai AirAsia’s operating licence or daily operations.
MBSB Research noted that with the Thai regulatory issue resolved, all conditions precedent for the disposal of Capital A’s aviation unit are expected to be fulfilled by the end of October. The transaction is anticipated to be completed by December 2025, marking a key milestone in the group’s effort to exit its financially distressed PN17 status.
The next steps include a RM1 billion private placement, capital reduction and distribution, and the allotment and listing of new AAG shares. Capital A is also expected to submit its PN17 uplift application by year-end and has requested to be exempted from the requirement to record two consecutive profitable quarters, having already satisfied other conditions.
MBSB Research made no changes to its earnings estimates, projecting Capital A’s revenue to rise from RM22.4 billion in FY2025 to RM25.5 billion in FY2027, with net operating profit expected to increase to RM801 million over the same period. The research house concluded that while the regulatory clarity provides much-needed visibility, the current valuation reflects most of the near-term catalysts, prompting the downgrade to a Neutral stance.
