Dear Tan Kam Meng (TA Securities analyst)
Referring to your CapitaA report:
Quote;”The acquisition of minority stake in PAA has added RM2.4bn to its retained loss but the impact was mitigated by the RM1.4bn remeasurement gain from consolidating TAA operations. The increase in capital deficit would not derail its regularisation plan to uplift the company from PN17. In fact, the company has submitted the draft document for consultation to Bursa Malaysia and is confident to complete the regularisation plan by 4Q23 or 1Q24.” Unquote
My questions to you:
Question 1: From where you get the information, the company has submitted the draft document for consultation to Bursa Malaysia?
Question 2: What do you imply the increase in capital deficit would not derail its regularisation plan to uplift the company from PN17?
Question 3: Below are conditions to uplift the company from PN17, has capitalA done anything at all to comply with below conditions to uplift the company from PN17?
The PN17 regularisation plan must be in complying with the requirements under paragraph 5.4 above, the PN17 Issuer and its Principal Adviser must demonstrate to the satisfaction of the Exchange, the following:
(a) the regularisation plan is able to strengthen the financial position of the PN17 Issuer including its securities holders’ equity, gearing, net asset position, cash flow position, and address its accumulated losses position;
(b) the steps taken or proposed to be taken are comprehensive and capable of addressing the issues that had caused the PN17 Issuer to trigger the Prescribed Criteria, such that the PN17 Issuer will –
(i) no longer trigger ANY of the Prescribed Criteria upon implementation of the regularisation plan; and
(ii) not trigger ANY of the Prescribed Criteria in the near future;
Event that trigger PN17:
2.1 Pursuant to paragraphs 8.04(2) of the Listing Requirements, where a listed issuer triggers any one or more of the following Prescribed Criteria it must comply with the provisions of paragraph 8.04 and this Practice Note:
(a) the shareholders' equity of the listed issuer on a consolidated basis is 25% or less of the issued and paid-up capital (excluding treasury shares) of the listed issuer and such shareholders' equity is less than RM40 million;
(b) receivers or managers have been appointed over the asset of the listed issuer, its subsidiary or associated company which asset accounts for at least 50% of the total assets employed of the listed issuer on a consolidated basis;
(c) a winding up of a listed issuer's subsidiary or associated company which accounts for at least 50% of the total assets employed of the listed issuer on a consolidated basis;
(d) the auditors have expressed an adverse or disclaimer opinion in the listed issuer's latest audited financial statements;
(e) the auditors have expressed an emphasis of matter on the listed issuer's ability to continue as a going concern in the listed issuer's latest audited financial statements and the shareholders' equity of the listed issuer on a consolidated basis is 50% or less of the issued and paid-up capital (excluding treasury shares) of the listed issuer; or
(f) a default in payment by a listed issuer, its major subsidiary or major associated company, as the case may be, as announced by a listed issuer pursuant to paragraph 9.19A of the Listing Requirements and the listed issuer is unable to provide a solvency declaration to the Exchange
Question 4: Had CapitalA already done the below Prerequisite for you to write: “In fact, the company has submitted the draft document for consultation to Bursa Malaysia and is confident to complete the regularisation plan by 4Q23 or 1Q24?
(a) All agreements to be entered into with third parties as part of the regularization plan have been duly executed by all parties to such agreements; and
(b) where the regularization plan involves a compromise or arrangement with the PN17 Issuer's creditors, the PN17 Issuer has taken reasonable steps to procure the agreement-in-principle of such creditors.
Question 5: What do you mean/where do you get the information operating cash flow inflow was stable at RM484.9mn, boosting the group’s total cash to RM735mn as at June-23?
As at 31/12/2022
Deposits, bank and cash balances: RM 469,985,000
Sales in advance: RM 1,428,011,000
As at 31/3/2023
Deposits, bank and cash balances: RM 589,594,000
Sales in advance: RM 1,546,450,000
As at 30/6/2023
Deposits, bank and cash balances: RM 735,003,000
Sales in advance: RM 2,024,943,000
Question 6: As at 30/6/2023: Deposits, bank and cash balances: RM 735,003,000. Sales in advance: RM 2,024,943,000. May I ask, using the advance sales/future revenue for current working capital how will that affect the future cash flow?
Question 7: 2Q2023 Current liabilities RM 14,208,631,000, current assets RM 2,269,900,000 thus net current liabilities RM (11,938,731,000), do you consider CapitalA is an insolvent company?
As a qualified and certified CFA your report should be based on your professional opinion/view on what was presented to you by CapitalA (Facts and Figures) and not your personal biased opinion. Quote; ”The increase in capital deficit would not derail its regularisation plan to uplift the company from PN17. In fact, the company has submitted the draft document for consultation to Bursa Malaysia and is confident to complete the regularisation plan by 4Q23 or 1Q24. The operating cash flow inflow was stable at RM484.9mn, boosting the group’s total cash to RM735mn as at June-23” Unquote
Dear CapitalA IR,
SEPANG, 29 August 2023 – Capital A Berhad (“Capital A” or the “Group”) today reported its unaudited financial results for the quarter ended 30 June 2023 (“2Q2023”).
The Group's relentless efforts have yielded encouraging outcomes demonstrating a steadfast recovery, through the core business operations having generated RM1 billion operating cash flow in this quarter. All four business segments - Aviation, Aviation Services, Logistics and MOVE continue to show strong growth, leading the Group to post Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) of RM 462 million in 2Q2023, up 325% Year-on-Year (“YoY”) while revenues increased to RM3.2 billion, representing a 115% YoY growth
Capital A financial
- Group EBITDA up 325% YoY to RM462 mil on the back of Revenue of RM3.2 bil
- Group operating cash flow over RM1 bil.
Question 1: Why only present the positive; Group (“EBITDA”) of RM462 million in 2Q2023 and Group operating cash flow over RM1 billion to general investing public and IBs analyst but omitting to state that under MFRS 16:
(i) On the Consolidated Income Statement, expenses which were previously included under aircraft operating leases will be replaced by finance costs – lease liabilities and depreciation of right of use asset;
(ii) On the Consolidated Cash Flow Statement, operating lease rental outflows, previously recorded within net cash flow from operating activities, are classified as “net cash flow used in financing activities” for repayment of principal of lease liabilities.
Depreciation of right of use assets: RM (354,185,000)
Finance costs-lease liabilities: RM (235,975,000)
Cash flows from financing activities:
Proceeds from borrowings: RM 130,989,000
Repayment of borrowing and lease liabilities: RM (1,107,380,000)
Acquisition on non-controlling interests: RM (52,061,000)
Net cash used in financing activities: RM (1,028,452,000)
Question 2: 2Q2023 Current liabilities RM 14,208,631,000, current assets RM 2,269,900,000, net current liabilities RM (11,938,731,000), what is CapitalA plan funding in the next 12 months to meet the obligation of net current liabilities of RM (11,938,731,000)?
As at 30/6/2023
Intangible assets: RM 4,698,958,000
Acquisition of a subsidiary:
Goodwill: RM 1,971,100,000
Landing rights: RM 1,971,900,000
2Q2023 - increase effective stake to 100% in Philippine Air Asia
An acquisition of goodwill of RM 1,971,100,000 sounds like a bailout for the non-controlling interest.
Question 3: Pre-acquisition what is the group effective holding in Philippine Air Asia?
Question 4: Pre-acquisition who is/are the non-controlling interest shareholder/shareholders?
Question 5: Is the deal a willing buyer, willing seller deal and why CapitalA did not publish the details of the deal?
Question 6: Looking at the dire situation of CapitalA balance sheet is “Revised official submission deadline to October 2023, aim to execute the plan in 4Q23/1Q24” achievable or another request of extension in the making?
Capital and reserves:
Share capital: RM 8,659,652,000
Merger deficit: RM (5,507,594,000)
Other reserves: RM 266,894,000
Foreign exchange reserve: RM (1,657,962,000)
Accumulated losses: RM (10,151,810,000)
Non-controlling interest: RM (1,813,867,000)
Total equity RM (10,204,687,000)
(a) the regularisation plan is able to strengthen the financial position of the PN17 Issuer including its securities holders’ equity, gearing, net asset position, cash flow position, and address its accumulated losses position.
Reference is made to the Company’s announcements dated 8 July 2020, 27 May 2021, 7 January 2022, 13 January 2022, 14 January 2022, 3 February 2022, 1 March 2022, 1 April 2022, 5 May 2022, 1 June 2022, 1 July 2022, 1 August 2022,1 September 2022, 3 October 2022, 1 November 2022, 4 November 2022, 29 November 2022, 1 December 2022 and 21 December 2022, 3 January 2023, 2 February 2023, 27 February 2023, 1 March 2023, 4 April 2023, 2 May 2023, 1 June 2023, 15 June 2023, 30 June 2023, 3 July 2023, 27 July 2023 and 1 August 2023 (“Announcements”).
(Unless otherwise stated, the words and abbreviations used herein shall have the same meaning as those defined in the Announcements.)
Pursuant to paragraph 4.1(c) of PN17 of the Main LR, the Board of Directors of the Company wishes to announce that the Company and the appointed advisers are in the midst of formulating a regularisation plan to address its financial condition.
As announced on 27 July 2023, Bursa Securities had granted the Company an extension of time of three (3) months until 7 October 2023 for the Company to submit its regularisation plan to the relevant regulatory authorities. Therefore, the Company has approximately one (1) month to submit its regularisation plan to the relevant regulatory authorities for approval to implement the same.
The Company will make the necessary announcement(s) regarding the development of the proposed regularisation plan accordingly.
This announcement is dated 1 September 2023.
The announcement did not mention the company has submitted the draft document for consultation to Bursa Malaysia. Can Bursa confirm whether capitalA did or did not submit a draft document for consultation?
On behalf of the Board of Directors of the Company, RHB Investment Bank Berhad wishes to announce that Bursa Malaysia Securities Berhad (“Bursa Securities”) had vide its letter dated 27 July 2023 resolved to grant the Company an extension of time of 3 months up to 7 October 2023 to submit its regularisation plan to the regulatory authorities.
The extension of time is without prejudice to Bursa Securities' right to proceed to suspend the trading of the listed securities of the Company and to de-list the Company in the event:
(i) the Company fails to submit its regularisation plan to the regulatory authorities on or before 7 October 2023;
(ii) the Company fails to obtain the approval from any of the regulatory authorities necessary for the implementation of its regularisation plan; or
(iii) the Company fails to implement its regularisation plan within the time frame or extended time frame stipulated by any of the regulatory authorities.
Upon occurrence of any of the events set out in (i) to (iii) above, Bursa Securities shall suspend the trading of the listed securities of the Company on the 6th market day after the date of notification of suspension by Bursa Securities and de-list the Company, subject to the Company's right to appeal against the delisting
This announcement is dated 27 July 2023
Question 2: Will Bursa consider a third extension or Bursa will proceed to suspend the trading of the listed securities of the Company and to de-list the Company in the event CapitalA fails to submit its regularisation plan to the regulatory authorities on or before 7 October 2023?
Dear Datuk Muhamad Umar Swift
Bursa Malaysia CEO
In my previous email I wrote:
I am more than grateful and thrilled when I read the link below:
Annual General Meeting CORPORATE GOVERNANCE CHECKLIST FOR SHAREHOLDERS
Co-author by SC, Institutional Investors Council Malaysia and MSWG
Since then I can see a sea-change in the way AGM was conducted. My many thanks to SC, Institutional Investors Council Malaysia and MSWG
Will SC and bursa working together with Institutional Investors Council Malaysia and MSWG come up with CORPORATE GOVERNANCE CHECKLIST in addressing?
1. How listed companies should respond to news, IBs analyst report and investor enquiry.
2. IBs analyst should include the briefing material, transcript of Q&A and interview as appendix.
3. How to prevent abuse on impairment of receivables to whitewash accounting fraud or siphoning listed company money to related parties, friendly parties or to own private company
4. Should SC informed the complainer the progress/status of complaint lodged with SC and Bursa (case still active or close with no action)
May I know any plan action by Bursa on my suggestion above?
I have a bad feeling that if Bursa proceed to suspend the trading of the listed securities of the CapitalA and to de-list the CapitalA in the event CapitalA fails to submit its regularisation plan to the regulatory authorities on or before 7 October 2023, many retail investors will loss their hard earned money, no thank to the IBs analyst and CapitalA IR giving them false hope that very soon CapitalA will be uplifted from PN17.
Have a good day
Lee Soon Sheng