Capital A Shares Surge on Strong Second-Quarter Performance

Shares of Capital A, the Malaysian conglomerate and parent company of AirAsia, soared early Wednesday as the company reported a significant turnaround in its second-quarter results. The surge in share prices was driven by growing optimism about the company’s future prospects, particularly in the recovering travel industry.

Impressive Financial Performance

Capital A announced on Tuesday that it had achieved a net profit of MYR1.12 billion ($241.1 million) in the second quarter, a substantial improvement compared to the net loss of MYR931.2 million recorded during the same period last year. The impressive turnaround was mainly attributed to the strong performance of the aviation segment. Furthermore, quarterly revenue more than doubled from MYR1.47 billion to MYR3.15 billion.

Positive Outlook for the Rest of the Year

Analysts at Hong Leong Investment Bank expressed confidence in Capital A’s ongoing momentum by predicting further profitability in the second half of this year. They highlighted the combination of capacity expansion, robust air travel demand, and lower jet-fuel prices as key factors driving the company’s recovery.

In addition, Capital A’s restructuring plan, if successfully executed, could lead to the removal of its financially distressed classification. This would potentially result in further upside to the company’s target price.

Revised Target Price and Ratings

Following the better-than-expected second-quarter earnings, Hong Leong Investment Bank raised Capital A’s target price to MYR1.45 from MYR1.15 and maintained its buy rating, citing favorable market conditions.

Maybank Investment Bank also revised its target price for Capital A to MYR1.01 from MYR0.90 after adjusting its core net loss forecast for 2023 and increasing its projections for core net profit in 2024-2025. However, Maybank downgraded its rating on Capital A from buy to hold, as it anticipates less than 10% upside from the previous day’s closing price.

Bright Future for AirAsia

Maybank analyst Yin Shao Yang noted that air travel demand and fares are likely to continue increasing due to seasonal factors. This further supports the positive outlook for Capital A and its subsidiary, AirAsia.

In conclusion, Capital A’s strong second-quarter performance has sparked optimism among investors, leading to a surge in share prices. The company’s strategic growth initiatives, favorable market conditions, and increasing air travel demand position it well for future profitability.

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