by NURUL SUHAIDI / pic by TMR FILE

MIDF Research believes Capital A Bhd has sufficient liquidity to last it through the financial year 2022 (FY22) and has thus maintained a ‘Neutral’ call on the company with an unchanged target price (TP) of 61 sen per share.

Capital A, formerly AirAsia Group Bhd, last week failed to get the RM500 million club facility secured from Danajamin Nasional Bhd’s Prihatin Guarantee Scheme after its major shareholders and founders refused to provide a guarantee on the facility.

MIDF noted Capital a management plans to take out USD$225 million (RM943.76 million) foreign loan in the first half of this year.

In a filing to Bursa Malaysia Bhd last Thursday, Capital A announced it would not be able to obtain the RM500 million club facility under Danajamin as the group is not able to accept or fulfil the following conditions required by Danajamin.

To guarantee security, the loan facility required the group CEO, Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, to be guarantors which had been declined.

Capital A noted it was not able to submit the regularisation plan and obtain approval to remedy its consolidated shareholder equity to be above RM40 million or 25% of its share capital or to obtain an extension of time to provide the regularisation plan for the matching tenure of the club facility.

On Oct 5, 2021, Capital A received approval from Danajamin for an 80% guaranteed loan of up to RM500 million under the Danajamin Prihatin Guarantee Scheme.

The loan was part of the Economic Stimulus Package for companies affected by the Covid-19 pandemic which can be utilised for the purpose of working capital, salaries and others.

“Even though the plan to take out the loan has fallen through, we believe Capital A has sufficient liquidity to last through FY22 assuming the monthly operating cash burn stays within RM62 million to RM70 million,” MIDF stated in a report on Capital A last week.

In FY21, Capital A’s cash holding stood at RM1.26 billion as compared to RM533.3 million during FY20 after going through rounds of fundraising exercises.

The fundraising exercise consisted of RM336.5 million raised via private placement, RM974.5 million raised via rights issue, where US$150 million equal to RM628.1 million foreign loan was obtained and only US$100 million or RM418.8 million had been withdrawn. Another exercise is US$100 million which was a RM418.8 million convertible loan from SK Group for BigPay.

MIDF estimated the forward losses remain unchanged. Prior to the pandemic, AirAsia operations in Malaysia generated almost 80% of its earnings with about half of the passengers being from international flights.

“We assume the number will gradually pick up as its aviation business slowly resumes in the coming quarters when the border has reopened.

“However, we remain cautious as several of their key Asean markets have yet to fully reopen their borders,” MIDF warned.

Another factor that can boost the earnings of Capital A’s is the rising jet fuel prices which had prompted airlines including AirAsia to reintroduce fuel fees, making fares more expensive.

“All in all, we are ‘Neutral’ on Capital A with an unchanged TP of 61 which was derived based on EV/Ebitda of six times,” it added.