KUALA LUMPUR: Capital A Bhd's plan to list brand management unit Capital A International (CAPI) on Nasdaq is expected to help reduce its current large negative equity position.
Hong Leong Investment Bank Bhd (HLIB) said Capital A will be able to reduce its current equity position from RM8.4 billion in the third quarter (Q3) 2023 to improve in Q4 2023.
The firm is overall positive on the move saying that CapA will be able to realise the underappreciated value of the group's business with the listing exercise."We expect more of such exercises to be undertaken for investors to fully appreciate the group's embedded value," it said in a note.
Meanwhile, HLIB said shareholders of CapA will also benefit through distribution-in-specie, allowing the shareholders to directly own shares in CAPI.
It said the valuation of CAPI at RM5.44 billion is already higher than Capital A's current market capitalisation of RM3 billion.
"We expect a similar exercise to be done for CapA's aviation business segment with the merging with AAX in the near term, as the next part of CapA's PN17 regularisation plan."Maintain Buy on the stock with unchanged target price of RM1.40," it added.
