KUALA LUMPUR: Capital A Bhd
’s unit AirAsia Aviation Group Ltd’s (AAAGL) move into Cambodia through a joint venture (JV) is seen as a step in the right direction by the analyst community.
However, they also noted that the gestation period for the JV to break even may take longer than usual, as international travel continues to recover from the depths of the Covid-19 pandemic.
“The foray into Cambodia enables AAAGL to operate in the various existing markets where it already has a presence and operations, thus enhancing its scalability, network connectivity and further reducing operating costs,” Kenanga Research said in its report.
“This latest move by AirAsia provides greater access to its domestic market and connecting it to the international markets across Asean.
“Specifically, Cambodian passengers will be able to connect to over 150 other destinations in over 20 countries where AAAGL operates in by connecting to flights operated by other AAAGL airlines,” it added.
Kenanga Research noted that tourist arrivals are expected to recover to pre-pandemic levels only in 2026-2027, implying that the gestation period for the venture will be long.
Kenanga Research also noted it expects Capital A’s system-wide revenue passenger kilometres or RPK to grow 52% to RM35bil in the financial year 2023 (FY23), after recovering by RM19bil to RM23bil in FY22 based on its forecast.
It said Capital A expects its passenger traffic to continue rising moving into 2023, judging by the encouraging load factors it has recorded to date.
“The group reiterated that the passenger throughput recovery is gaining traction.
“In November 2022, the group operated 125 aircraft (about 60% of our four airlines fleet size) and is currently targeting to get 140 operational aircraft by end-2022 and expects to reach full fleet utilisation by the second quarter of 2023,” it said.
By end November 2022, Kenanga Research said that the group would have resumed 86% and 60% of pre-pandemic domestic and international capacities, respectively, by utilising 124 aircraft.
Kenanga Research has maintained its “market perform” rating on the stock with a sum-of-parts-derived target price of 60 sen.
Meanwhile, MIDF Research said it had made no changes to its earnings estimates for the company, as the setting up of a new airline JV may entail a long gestation period.
It noted that potential catalysts for the stock include a downtrend in jet fuel prices, the strengthening of Asean currencies against the US dollar and the return of Chinese tourists.
MIDF Research said it has maintained its “neutral” call on Capital A with an unchanged target price of 59 sen.
