KUALA LUMPUR (Feb 6): While Capital A Bhd's forthcoming quarterly results might fall short due to decreased demand and lower fares during the period, optimism persists on the group's efforts to address its Practice Note 17 (PN17) status, said Maybank Investment Bank.

“4Q23 may disappoint but operations still improving. 4Q23 passengers carried and load factor were counter seasonally flattish as we understand that demand in Oct and Nov 2023 was less than ideal.

“Moreover, we also understand that fares in Oct and Nov 2023 were counter seasonally flat,” said the research firm in a note on Tuesday.

The research house maintained its “buy” call with a lower sum-of-parts target price of 92 sen, as it expects Capital A to take a longer time to return its entire fleet to service in 2024.

On a more positive note, Maybank IB foresees more details on its PN17 regularisation before month-end.

“We also understand that more details on its plan to reverse takeover a SPAC and inject its AirAsia brand and aircraft leasing business into it ought to be known by 30 Apr 2024.

“With the two aforementioned transactions, Capital A is reasonably confident that it can narrow its negative shareholders’ equity position,” it said.

Wider FY2023 core net loss forecast

Maybank IB widened Capital A’s FY2023 core net loss estimate to RM721 million and FY2024 core net loss to RM63.7million. It trimmed the company’s FY2025 core net profit by 13% to RM556 million.

It noted as at Dec 31, 2023, Capital A's operating aircraft accounted for only 75% of its existing fleet.

“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,” it said.

“While disappointed, we believe that it is merely a question of ‘when’ its entire fleet will be returned to service and not ‘if’,” it added.

As at 10.40am, Capital A shares settled half sen or 0.7% lower at 70 sen, valuing the company at RM2.98 billion.