Broker: Maybank Investment Bank Berhad
Date of Report: June 1, 2025

Capital A (AirAsia Group) Set for Takeoff: Robust Earnings Growth, Strategic Restructuring, and New Listings Drive Bullish Outlook

Overview: A Vigorous Start to 2025 for Capital A

Capital A, Asia’s leading low-cost carrier and parent to AirAsia, has kicked off 2025 with stronger-than-expected earnings and a strategic transformation that could redefine its growth trajectory. Maybank Investment Bank Berhad has upgraded Capital A to a “BUY” with a raised sum-of-the-parts target price (SOTP-TP) of MYR1.09, up 27% from previous estimates. The report highlights outperformance driven by higher-than-expected ancillary income, a favorable outlook on fuel costs and currency, and ambitious plans for dual and spin-off listings in major global exchanges.

Key Financial Highlights and Forecasts

• 1Q25 core net profit (aviation and non-aviation) reached MYR116.8m, accounting for 33% of full-year estimates. Non-aviation core net profit was MYR37.7m, or 23% of the annual estimate.
• Ancillary revenue per passenger rose to MYR60, MYR3 higher than projected, resulting in an MYR30m-MYR40m positive impact on earnings.
• Forecast upgrades for FY25E/FY26E/FY27E core earnings by 43%/27%/27% respectively, reflecting increased ancillary income led by baggage fees.

Strategic Restructuring: PN17 Upliftment and New Listings

• Capital A aims to complete the disposal of its aviation business to AirAsia X by July 2025, which will eliminate negative shareholders’ equity and help secure the upliftment of its PN17 classification by September 2025.
• Plans are underway for a dual listing on the Hong Kong Stock Exchange and the listing of Brand AA (the AirAsia brand licensing arm) on NASDAQ.
• Capital A will receive 2.3 billion new AirAsia X (AAX) shares from the disposal, intending to distribute 1.7 billion (73%) to shareholders in specie.

Growth Drivers: USD Weakness, Lower Jet Fuel Prices, and Fleet Expansion

• Every 1% weakening in the USD is expected to add approximately MYR8m-MYR9m to pre-tax earnings.
• Each USD1/barrel decline in jet fuel prices could boost pre-tax earnings by MYR66.4m.
• Recovery continues as the remaining 9% of the fleet is set to return to service by 3Q25.

Detailed Segment Performance: Non-Aviation Businesses Accelerate

• Strong growth in logistics (Teleport) and F&B (Santan) segments; BigPay remains loss-making but with improved negative EBITDA.
• Brand AA contributed 48% of 1Q25 non-aviation EBITDA, highlighting the value in AirAsia’s brand licensing business.

Discontinued Aviation Operations: Passenger and Revenue Metrics

• 1Q25 passengers carried: 16.2 million (+4.9% YoY)
• Average fare: MYR241 (-8.7% YoY)
• Ancillary revenue per passenger: MYR60 (+5.3% YoY)
• Load factor: 86% (down from 90% YoY)
• Unit passenger revenue: MYR301 (-6.2% YoY)
• Unit cost (CASK): 20.55 sen (-12% YoY), helped by a 16.4% YoY drop in average fuel price to USD102/bbl

Note: Key one-offs in 4Q24 included a forex loss of MYR1.35b and provision for aircraft redelivery of MYR594.9m.

Valuation: Sum-of-the-Parts (SOTP) Approach Drives TP Upgrade

• Value ascribed to non-aviation businesses for the first time, including Asia Digital Engineering, Move, Teleport, and Santan at 10x FY25E PER—conservative compared to regional peers.
• Brand AA valued via discounted cash flow; BigPay and other loss-making units valued at book.
• Tune Protect and AirAsia X valued at market capitalization, with distribution of AAX shares to Capital A shareholders enhancing value clarity.

Regional Peer Comparison

Investment Thesis: Value Proposition, Key Drivers, and Risks

• Capital A is Asia’s largest low-cost carrier with the highest market share, largest fleet, and most extensive route network across Malaysia, Thailand, Indonesia, Philippines, and Cambodia.
• It is renowned for being the world’s lowest unit cost airline and has won the ‘World’s Best LCC’ award 15 times in a row.
• Rising Asian middle-class and a post-pandemic travel rebound underpin long-term growth.
• Key upside drivers: policy easing (e.g., visa relaxation), less competition post-pandemic, and potential financial assistance.
• Risks: volatile fuel prices, weak MYR (as 60-70% of costs are USD-denominated), and exogenous shocks (e.g., pandemics, accidents).

Company Profile and Shareholder Structure

• Operations: Malaysia, Thailand, Indonesia, Philippines, Cambodia
• 52-week range: MYR0.67–1.09
• Market capitalization: MYR3.7B (USD865M)
• Issued shares: 4,333m
• Major shareholders: Tune Air Sdn Bhd (11.9%), Tune Live Sdn. Bhd. (11.8%), Positive Boom Ltd. (7.7%)
• Free float: 55.8%

Other Publicly Listed Companies Covered

• AirAsia X (AAX MK) – BUY, Current Price: MYR1.68, Target Price: MYR2.69

Conclusion: Capital A Poised for a New Era

Capital A’s robust earnings rebound, strategic asset restructuring, and clear plans for new listings position it for strong upside potential. With a brighter outlook for ancillary income, cost tailwinds from fuel and currency, and a well-defined SOTP valuation, the company is on track for recovery and growth. The broker’s upgrade to “BUY” reflects confidence in management’s vision and the company’s unique position in Asia’s aviation and digital services landscape.

Historical Recommendations

• Recent target price upgrades: RM0.86 (previous), now RM1.09
• Consistent Buy/Hold recommendations over the past 12 months, with target prices between RM0.8–1.3

Contact and Coverage

Maybank Investment Bank Berhad, with research offices across Malaysia, Singapore, London, Hong Kong, Indonesia, India, Philippines, Thailand, and Vietnam, provides institutional coverage for Capital A and related stocks.