16 February 2022
“We’re looking to raise, actually, in excess of RM400 million to fund the expansion and growth [of ADE].” — Capital A’s co-founder and chief executive officer (CEO) Tan Sri Tony Fernandes
Capital A Bhd (formerly known as AirAsia Group Bhd) has said that it is in the midst of raising more than RM400 million to build the country’s biggest integrated maintenance, repair and overhaul (MRO) facility in Kuala Lumpur International Airport (KLIA).
The megaproject will be undertaken by its wholly-owned engineering arm, Asia Digital Engineering (ADE).
The fundraising exercise comes within two months after the aviation group completed its rights issue last December that raised RM974.5 million. Prior to that, the group, which has slipped into PN17 status, also raised RM336.48 million from the private placement of new shares and received a RM500 million credit facility from Danajamin in 2021.
Capital A’s co-founder and chief executive officer (CEO) Tan Sri Tony Fernandes said that the investment holding group would support the growth of ADE.
“We’re looking to raise, actually, in excess of RM400 million to fund the expansion and growth [of ADE],” Fernandes was quoted by Reuters as saying at the 2022 Singapore Airshow on Tuesday (Feb 15).
Capital A announced that ADE will be building a 380,000 sq ft integrated MRO facility in KLIA in mid-2022 and it is expected to be completed within two years.
The statement highlighted that ADE’s new facility will make it one of the largest in the region as it will be able to provide heavy MRO services for up to 14 commercial aircraft at any time.
Turnaround from PN17 status remains in progress
Capital A was classified as a PN17 company after Bursa Malaysia rejected its application to extend the 18-month relief period that ended on Jan 7.
The reason for its slide into the PN17 status was due to the negative shareholders’ equity position of RM3.2 billion as at its third quarter ended Sept 30, 2021 (3QFY21), which was a result of a nine-quarter net loss streak beginning from 3QFY19, even before the pandemic hit in 2020.
Nonetheless, Capital A has gone through many rounds of fundraising exercises, which saw it raise RM2.6 billion, as well as a wholesale change of its corporate strategy from an aviation group to an investment holding group.
Maybank Investment Bank Bhd’s analyst Samuel Yin Shao Yang in a note on Jan 17 highlighted that the cause for the PN17 status was due to Capital A’s balance sheet, not its cash flow.
Yin added that the RM2.6 billion raised by Capital A could carry it through FY22 when compared against the group’s balance sheet position.
Maybank rated Capital A as a “buy”, with a target price (TP) of RM1.31.
In a note on Jan 14, UOB Kay Hian Malaysia’s analyst Jack Goh also believed that Capital A could last through FY22 and FY23, provided that its monthly operating cash burn remained constant around RM68 million to RM 75 million.
Goh rated the investment holding group with a “hold” call and a TP of 76 sen.
However, CGS-CIMB Securities Sdn Bhd’s analyst Raymond Yap did not think Capital A was out of the woods yet, rating it a “sell” and the lowest TP of nine sen among all 18 analysts covering Capital A, according to Bloomberg data.
In a note on Feb 10, Yap expected Capital A’s negative shareholders’ equity situation to worsen from RM3.2 billion as at 3QFY21 to RM5.6 billion by the end of FY22 while the diversification of Capital A into digital businesses remained “in the investment stage where they may consume significant amounts of cash resources, which is also because they are competing against established and well-funded competitors”.
To recap, Capital A has been in the red since FY19 as it reported net losses of RM283 million and RM5.89 billion for FY19 and FY20, respectively.
For the cumulative nine months ended Sept 30, 2021, Capital A managed to narrow its net loss to RM2.23 billion from RM2.66 billion in the same period of FY20, despite its revenue falling by a third to RM1.02 billion from RM2.97 billion.
Capital A’s shares were unchanged at 63 sen on Tuesday’s market close, giving the investment holding group a market capitalisation of RM2.62 billion based on 4.16 billion outstanding shares. The group’s share price has declined 18 sen or 22.22% since the beginning of 2022.
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