KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research is positive on Capital A Bhd's proposal to streamline its aviation segments, as it will help it compete better with established full service carriers.
It also viewed the exercise positively as it strengthens AAG's business model for long haul–short haul integration, with a new medium haul segment as the intermediary, by leveraging onto the new A321 fleets.
Post restructuring, Capital A will still retain ownership of the four major business segments namely, ADE maintenance repair, overhaul services; Teleport logistic; AirAsia MOVE SuperApp; and digital finance BigPay.
Capital A will also still own 18.39 per cent stake in AAG.
HLIB research said management intends to continue to grow the four major business segments and eventually list them in the future. Other businesses include Santan catering services and AirAsia branding (to be listed on Nasdaq).
Capital A's equity position is expected return to positive position of RM492.8 million (assuming no conversion of outstanding redeemable convertible unsecured Islamic debt securities (RCUIDs) and warrants) to RM1.6 billion (assuming full conversion of outstanding RCUIDs and warrants), effectively allowing it to exit the PN17 status.
"Shareholders of Capital A will benefit from it exiting PN17 status, Capital A's new focus on the growth of the aviation support business segments, leveraging onto AAG's growth and new shareholdings in AAG, to ride on the expected growth of low cost carrier globally," it said.
Capital A on April 25, 2024 entered into conditional share agreements with AAG to dispose of AirAsia Aviation Group Limited and AAB for RM6.8 billion, in a related party transaction.
The proposed deals will be satisfied via issuance of 2.3 billion new AAG shares to Capital A and AAG assuming RM3.8 billion debt due to AAB.
On Jan 8, 2024, Capital A entered into a non-binding letter of offer with AirAsia X Bhd (AAX) for the disposal of AAG and AAB.
Capital A and AAX will need to get approval from shareholders and relevant regulators as well as financiers/lenders. The exercise is expected to be completed in the third quarter of 2024. HLIB maintained "Buy" call on the stock with a target price of RM1.68.