By Ying Xian Wong
Capital A shares rose early Wednesday, driven by optimism about the Malaysian conglomerate’s outlook after reporting a second-quarter swing to profit amid strong recovery in travel demand.
Shares of Capital A, the parent of low-cost carrier AirAsia, jumped as much as 8.3% and were recently 4.7% higher at 1.00 ringgit, bringing year-to-date gains to 60%.
Capital A said late Tuesday that second-quarter net profit was MYR1.12 billion ($241.1 million), compared with net loss of MYR931.2 million a year earlier, mainly driven by improvement in the aviation segment’s overall performance. Quarterly revenue more than doubled to MYR3.15 billion, from MYR1.47 billion a year ago.
Given ongoing momentum in capacity expansion, in conjunction with strong air travel demand and lower jet-fuel prices, Capital A could continue its recovery with reporting profits in the second half of this year, Hong Leong Investment Bank analyst Daniel Wong said in a note.
Wong also expects further upside to his target price if Capital A’s restructuring plan is successfully executed to remove its financially distressed classification.
Hong Leong raised Capital A’s target price to MYR1.45 from MYR1.15 and maintained its rating at buy, citing tailwinds.
Meanwhile, Maybank Investment Bank raised its target price for Capital A to MYR1.01 from MYR0.90 after revising down its 2023 core net loss forecast and raising its 2024-2025 core net profit estimates following the second-quarter earnings beat.
Air demand and fares could trend higher on seasonally rising demand, Maybank analyst Yin Shao Yang said in a note.
However, Maybank downgraded Capital A’s rating to hold from buy, given its projection of less than 10% upside from Tuesday’s closing price.
Write to Ying Xian Wong at [email protected]
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