Capital A Berhad is navigating through a challenging period, with its 2Q24 results revealing a core net loss of RM72.8 million, bringing the six-month core net loss to RM6.4 million. This outcome was below expectations, primarily due to a lower-than-anticipated return of aircraft to service, with only 77% of the fleet operational at the end of 2Q24, compared to the expected 85%.
Despite these setbacks, analysts retain a cautiously positive outlook on Capital A. The company benefits from favourable trends such as easing jet fuel prices and a strengthening Malaysian Ringgit (RM). The company's future plans include the disposal of its shareholding in its five airlines to AAX in the fourth quarter of 2024, which is expected to lift its PN17 classification by early 2025.
In terms of operational performance, Capital A reported a significant 213% year-on-year increase in EBITDA, though this figure still fell short of expectations, representing only 42% of the annual estimate. Average fares in 2Q24 declined to MYR240 from MYR264 in the previous quarter, but the company forecasts that fares will stabilise. Ancillary revenue per passenger is anticipated to remain above MYR50.
Looking ahead, Capital A is focused on reactivating its fleet and expanding its capacity. Analysts' evaluations reflect a blend of cautious optimism: An analyst maintains a BUY rating with a target price of MYR1.00, underscoring confidence in the company's long-term recovery and growth potential. Another analyst also upholds a BUY rating with a target price of RM1.06, driven by strong load factors and recovery in seat capacity. Meanwhile, one stock broking house has upgraded its stance to MARKET PERFORM from UNDERPERFORM, setting a target price of RM0.78. This reflects a neutral view, acknowledging recent share price corrections and the potential for future recovery.
The company's strategic goals include improving fleet utilisation and expanding its digital services. By the end of FY24, Capital A plans to have 195 aircraft operational, an increase from the current 82%. This expansion is expected to support a rebound in passenger traffic to pre-pandemic levels and enhance overall performance.
Source: Maybank, Kenanga, MIDF
Title: Veered off course ever so slightly in 2Q24, Gearing Up for Stronger Quarters, A Weak Set of Results, Look beyond FY24
