In fact, both have been on a roll as their share prices have been ramping up recently. Year-to-date, AAX is up 180%, whilst sister company Capital A is up 27.69%.
At the market close today, AAX was up 19.15% or 27 sen at RM1.68, while Capital A was up 7.1% to 83 sen. This gave AAX a market capitalisation of RM696.89 million, and RM3.45 billion for Capital A.
The rise has been more pronounced for AAX, which rose 41% just this week alone. The surge in its share price prompted Bursa Malaysia Securities to slap it with an unusual market activity (UMA) query today.
The stock rose as much as 26.95% or 38 sen to RM1.79 before midday today while volume traded also surged to 43.86 million, 29 times more than its daily average of 1.51 million.
Capital A was the second most active counter today with 167.78 million shares traded.
AAX responded, via a filing with Bursa, by saying other than the ongoing development of their regularisation plan to restructure its businesses and financial condition, it is “not aware” of any corporate developments, rumours, or report which may have prompted the UMA.
Growing positive sentiment
The strong rebound has come on the back of positive sentiment from investors and travellers as the aviation industry picks up following the reopening of economies around the region.
Both companies finally returned to black in the last quarter with AAX posting a net profit of RM153.48 million and Capital A with RM256.2 million.
Both aviation companies were founded by Capital A CEO Tony Fernandes and Kamarudin Meranun, the AAX CEO. Capital A is known for its low-cost flights in the region while AirAsia X is the low-cost, long-haul affiliate of Capital A.
The duo own 26.31% of Capital A shares through their private vehicles, Tune Live Sdn Bhd and Tune Air Sdn Bhd.
Kamarudin is the largest shareholder of AAX, with a direct stake of 8.94%, while Fernandes holds a direct stake of 2.69%. Both also own collectively an indirect stake of 31.59% through Tune Group Bhd and AirAsia Bhd.
Travel industry boon
Capital A and AAX have been direct beneficiaries of the reopening of economies in the region, especially China.
“Airports, hotels, airlines are expected to benefit from the recovery of the travel industry,” Mercury Securities equities analyst Ronnie Tan told FMT Business.
“We believe the travel industry will pick up and should benefit from the gradual return of Chinese travellers. China is an essential catalyst for the tourism industry as it was the 2nd highest contributor to inbound foreign travellers into Malaysia in 2019.
“With the reopening of China’s borders, we think that passenger volumes should continue to improve in 2023,” he added.
Tan also said the Budget 2023 announcement, which saw provisions for the expansion of Penang International Airport and Subang Airport, should boost traffic flow of passengers.
Tourist numbers in 2022 were still low at 2.5 million travellers. Kenanga Investment Bank Bhd projects these numbers to jump four-fold to 9.6 million in 2023, which is still a far cry from the 26.1 million in 2019.
Despite this, the research house maintains a “neutral” view on the sector, downgrading Capital A to underperform following its run-up in share price last week, with a target price of 67 sen.
“We only expect the numbers (aviation industry) to catch up to pre-pandemic levels by 2024,” it added.
Kenanga projects Capital A’s system-wide revenue passengers’ kilometres (RPK) to grow 52% to RM35 billion in FY2023, after recovering by RM19 billion to RM24 billion in FY22.
Capital A expects its passenger demand to continue to rise moving into 2023. In November 2022, the group already operated 125 aircraft and is currently targeting to get 140 operational aircraft to reach full fleet utilisation by Q2 FY2023.
Through the turbulence
Both Capital A and AAX slipped into Practice Note 17 (PN17) status as the Covid-19 pandemic took a heavy toll on their financials.
However, Fernandes said in January that “Capital A can be out of PN17 status, definitely this year, and I hope much earlier than that”.
Kenanga stressed that the “clock is ticking” for Capital A to come up with a more viable regularisation plan to lift it out of its PN17 status.
The April 28 deadline for AAX to submit its regularisation plan to the stock exchange is also fast approaching. Capital A has more time to work on its restructuring exercise as it is required to submit its plan by July 7.
Out of 13 analysts who covered Capital A, five have “buy” ratings, five have “hold” calls, while three are recommending investors to sell the stock.
The analysts’ target prices are in a wide range of between 40 sen and RM1.25 as of last week.
New faces for digital business
Last week, Capital A announced a reshuffle in their C-suite roster with Colin Currie appointed as the CEO of AirAsia Digital and John Cheing appointed as the CFO of AirAsia Digital from March 1. It also announced Mohamad Hafidz will be acting CEO for AirAsia super app.
The trio will be focusing on the AirAsia super app, a one-stop solution for flight bookings and other services such as hotel bookings, ferry tickets, food delivery, ride hailing and insurance.
Kenanga says that the app is expected to grow, underpinned by the continued resurgence of travel demand from borders reopening and tactical campaigns.
However, it added that AirAsia’s digital segment is expected to remain loss-making.
Fernandes wants to expand into a group of diversified travel and lifestyle services, signalling to customers it will be more than just an airline. The AirAsia super app is seen as the jewel of the line-up.