CEO Morning Brief

Capital a Anticipates Further Revenue Upswing After 3Q Losses Narrow Sharply

edgeinvest
Publish date: Fri, 01 Dec 2023, 08:50 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 30): Capital A Bhd reported a significantly smaller net loss of RM178.82 million for its third quarter ended Sept 30, 2023, down from RM901.31 million in the corresponding quarter last year, as revenue more than doubled on continued improvement in its aviation business.

Loss per share for 3QFY2023 dropped to 4.30 sen per share from 22.30 sen per share in 3QFY2022, its bourse filing showed. Group revenue for 3QFY2023 surged to RM4.23 billion from RM1.96 billion in 3QFY2022.

But the latest quarterly earnings marked a slip back into the red for the group after three consecutive quarters of profitability, even as revenue improved further from the RM3.15 billion it recorded in the immediate preceding quarter (2QFY2023) — when it made a net profit of RM1.12 billion.

This was largely because 2QFY2023 had logged a gain of RM1.37 billion from the consolidation of Asia Aviation Public Company Ltd Group, aside from lower operating expenses.

In 3QFY2023, the group's aviation segment reported revenue of over RM3.9 billion, up 116% compared to last year on surging domestic and international travel. “The strong rebound catapulted revenue to the pre-Covid period with 89% of current capacity and a positive EBITDA margin of 10% against an EBITDA margin of 6% in 3Q2022,” said the group.

The group carried 14.71 million passengers in 3QFY2023, more than double the 7.12 million it served a year ago, while capacity was up 99% to 16.49 million seats from 8.29 million a year ago.

Meanwhile, its logistics and digital segments reported improved revenues of RM188.86 million and RM121.99 million, respectively, for the quarter under review.

For the nine months ended Sept 30, 2023, the group made a net profit of RM996.55 million compared to a net loss of RM2.74 billion a year ago, with revenue more than doubling to RM9.91 billion from RM4.24 billion.

"Year to date, the consolidated airlines have now recovered 76% of passenger volume from 9M2019, surpassing overall capacity recovery of 73% for the same period," said the group.

The group is now expecting a further revenue upswing that exceeds the pre-pandemic levels as it approaches the final quarter of the year, said Bo Lingam, chief executive officer (CEO) of the group's aviation business under AirAsia Aviation Group, in a separate statement.

"This optimistic outlook is based on robust travel demand during the peak season, which enables us to command premium fares and boost ancillary income. We are amplifying our domestic capacity in all markets especially in Malaysia and Thailand, fortifying our market share and taking advantage of lessening competition.

"Internationally, aligning with the forecast market's recovery pace, we are rapidly increasing our growth in China, also encouraged by the much-anticipated announcement of a visa-free travel between China and Malaysia, starting Dec 1, 2023. Another notable strategic move is our accelerated expansion in India, introducing new destinations to deepen market penetration and enhance regional connectivity, whose traffic will also boost following the visa free travel between India and Malaysia.

"In parallel, we expect high average fares as the market is still experiencing a shortage of operational aircraft. Combining this with the decreasing fuel price, we expect a profitable end to 2023,” said Bo.

Capital A shares shed 2 sen or 2.3% to 87 sen at closing, valuing the group at RM3.67 billion.

Source: TheEdge - 1 Dec 2023

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