KUALA LUMPUR: Maybank Investment Bank (Maybank IB) research has widened its loss forecasts for Capital A Bhd for financial year 2023 (FY23), with an underwhelming performance expected for the fourth quarter of FY23 (4Q23).
Maybank IB research expects core net losses to widen by 58 per cent to RM721 million in FY23, but lower losses of RM63.7 million in FY24.
It has a "buy" call on the stock with a target price of 92 sen.
"4Q23 results may underwhelm but operations were better in the more recent 2H of 4Q23. Going into FY24, we are wary that it is taking a long time to return its entire fleet to service but believe it will eventually materialise. Positively, more details on its Practice Note 17 regularisation plan ought to be known soon," Maybank IB research said.
It said 4Q23 passengers carried and load factor were counter seasonally flattish with demand in Oct and Nov 2023 less than ideal.
Maybank IB said fares in Oct and Nov 2023 were also counter seasonally flat.
"By Dec 2023 however, we understand that demand improved. Furthermore, we understand that efforts to raise fares after MYAirlines (not listed) suspended operations was truly felt in Dec 2023 after competitively priced fares in Oct and Nov 2023 ran their course," the firm said.
As at Dec 31, 2023, operating aircraft accounted for only 75 per cent of its existing fleet.
Maybank IB research had forecast 100 per cent of its fleet to be in operation by -ear-end.
The firm said the slower-than-expected return to service of its remaining aircraft is due to the unavailability of engine spare parts.
"Capital A expects the remaining parked aircraft to be returned to service by mid this year but we assume that they will be returned to service by end this year instead. While disappointed, we believe that it is merely a question of 'when' its entire fleet will be returned to service and not 'if'," Maybank IB research said.
It expects more details on Capital A's plan to sell its shareholding in its four airlines to AirAsia X ought to be known before month's end.
"We also understand that more details on its plan to reverse takeover a US-based special purpose acquisition company and inject its AirAsia brand and aircraft leasing business into it ought to be known by Apr 30, 2024," Maybank IB research said.
With the two aforementioned transactions, Capital A is reasonably confident that it can narrow its negative shareholders' equity position.