Capital A’s Q1 2025: A Strategic Shift Towards Non-Aviation Growth Amidst Restructuring
Greetings, fellow investors and market watchers! Capital A Berhad, a name synonymous with innovation in the ASEAN region, has just released its unaudited consolidated results for the first quarter ended 31 March 2025. This report offers a compelling glimpse into the company’s ongoing transformation, showcasing a significant turnaround in profitability and robust growth in its non-aviation segments, even as it navigates a crucial corporate restructuring.
The headline? Capital A has delivered a remarkable financial performance, swinging from a loss to a substantial profit before tax. This comes at a pivotal time as the company strategically pivots its focus, with its aviation business now presented as a discontinuing operation. Let’s dive deeper into the numbers and what they mean for the future.
Core Financial Highlights: A Group in Transition
The first quarter of 2025 has been a period of strong recovery and strategic realignment for Capital A. The Group’s overall performance, including its aviation segment, demonstrates a significant rebound in profitability.
Overall Group Performance (Including Discontinuing Operations)
For the quarter ended 31 March 2025, Capital A reported a total revenue of RM5.3 billion, marking a 1.4% increase compared to the same period last year. More impressively, the Group’s Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) surged by 7.2% to RM1.1 billion.
The most striking turnaround is seen in the Profit Before Tax (PBT), which stood at RM231.4 million for 1Q25, a stark contrast to the loss before taxation of RM249.8 million recorded in 1Q24. This positive shift underscores the effectiveness of ongoing cost optimization efforts and improved operational performance across various segments.
Cash Flow Commentary
The Group’s cash flow from operating activities remained robust, indicating healthy business operations. Here’s a quick look:
Q1 2025
Cash from Operating Activities: RM1,190.1 million
Cash from Investing Activities: (RM6.6 million)
Cash from Financing Activities: (RM1,067.6 million)
Net Cash Flow for the Period: RM115.9 million
Q1 2024
Cash from Operating Activities: RM789.2 million
Cash from Investing Activities: (RM97.4 million)
Cash from Financing Activities: (RM434.0 million)
Net Cash Flow for the Period: RM257.8 million
The positive operating cash flow was driven by overall business improvement. Cash flow from investing activities included property, plant, and equipment purchases, while financing activities primarily involved proceeds from borrowings net of debt and aircraft lease payments.
Performance of Continuing Operations: The New Core
With the aviation segment slated for disposal, the “Continuing Operations” represent Capital A’s future core businesses. These segments have shown impressive growth:
Revenue for Continuing Operations grew by 15% year-on-year to RM778.3 million in 1Q25. The EBITDA for these operations also saw a significant increase of 24% to RM101.9 million. Net profit after tax for continuing operations rose by RM11.0 million to RM59.1 million, benefiting from unrealised foreign exchange gains and improved operating performance.
The revenue contribution from these segments is diverse, with Logistics contributing 33%, MRO (Maintenance, Repair, and Overhaul) services 27%, and the online travel platform (AirAsia MOVE) 16%. The remaining 24% came from brand, inflight, and other businesses.
Deep Dive into Key Continuing Segments:
- Asia Digital Engineering (ADE): This MRO service provider saw its revenue jump by 23% year-on-year to RM207 million, driven by a higher number of C-Check base maintenance activities. Despite increased operational costs due to expansion, ADE reported an EBITDA of RM40.0 million.
- Teleport (Logistics): Teleport achieved a record revenue of RM258 million, a 15% year-on-year increase. Its e-commerce revenue surged by 39% to RM88 million, with parcels moved increasing by 44% to 27.8 million. Cargo revenue also grew by 7%. Teleport recorded its highest 1Q25 EBITDA of RM23 million, demonstrating stable margins and strategic partnerships.
- AirAsia MOVE: The online travel platform reported a revenue of RM127.2 million and an EBITDA of RM16 million. While revenue decreased slightly (1.7% year-on-year) due to a reduction in AirAsia MOVE’s share of AirAsia sales, strong cost management, including headcount rationalisation and tech optimisation, led to a significant 54.5% improvement in EBITDA compared to 1Q24. The platform continues to show strong traction in monthly active users and growth in its non-AirAsia flight and hotel portfolios.
Performance of Discontinuing Operations – Aviation
The core aviation business, despite being earmarked for disposal, continues to be a significant contributor to the Group’s top line:
The Aviation Group recorded a revenue of RM4,914 million for 1Q25. While this was a slight decrease of 0.7% year-on-year, primarily due to lower average fares, the Group’s EBITDA for aviation improved to RM980 million from RM957.9 million in the same period last year. Crucially, the Aviation Group registered a Profit Before Taxation of RM161.6 million, a significant recovery from a loss of RM293.5 million in 1Q24, mainly driven by lower fuel prices and cost optimization.
Quarter-on-Quarter Comparison (1Q25 vs 4Q24)
Comparing the current quarter to the immediately preceding quarter (4Q24), the Group experienced a seasonal dip, which is typical for the aviation business where Q4 is usually the strongest. Group EBITDA was RM1,106.1 million in 1Q25, lower than the RM1,279.1 million in 4Q24. However, the Group swung to a net profit of RM692.3 million in 1Q25 from a net loss of RM1,716.9 million in 4Q24. This significant improvement was mainly attributed to a foreign exchange gain of RM74.1 million in the current quarter compared to a substantial foreign exchange loss of RM1,351.0 million in the preceding quarter, along with lower interest expenses and no aircraft delivery costs in 1Q25.
Risks and Prospects: Charting the Future Course
Capital A is undergoing a monumental corporate exercise, aiming to streamline its operations and exit its PN17 status. This strategic pivot defines its immediate future and long-term prospects.
Corporate Restructuring and PN17 Status
The twin corporate exercises to dispose of the aviation business and regularise the company’s financial position are progressing. On 7 May 2025, shareholders and RCUIDS holders approved a capital reduction of up to RM6 billion, a critical step towards exiting PN17 status. While significant milestones have been achieved, the completion timeline has shifted to 3Q25 due to pending approvals from two aircraft lessors and delays from Thailand’s Securities and Exchange Commission regarding a RM1 billion private placement.
Outlook for Capital A Companies (Continuing Operations)
The restructuring is designed to empower Capital A’s non-aviation businesses to pursue their own growth trajectories:
- ADE: Demand for ADE’s MRO services continues to outstrip supply, with all 16 maintenance lines fully booked for the next 12 months. Plans for four additional hangar lines at KLIA are on track for completion by end-2026. ADE is also raising up to RM250 million to fund these developments and regional expansion, including potential acquisitions. The focus remains on addressing supply chain constraints, particularly for aircraft engines, to support fleet reactivation.
- AirAsia MOVE: Monthly Active Users (MAUs) remained stable, with strong app installations. The MOVE brand is gaining significant recognition. While AirAsia Flights transactions saw a decrease due to pricing challenges, ancillary revenue per passenger grew by 8% year-on-year, driven by improved personalisation. The non-AirAsia flight portfolio grew by a stellar 16% year-on-year, and the Stays and Hotels portfolio expanded by 38% year-on-year, reflecting strong platform appeal and a focus on budget accommodations. Profitability continues to improve through cost optimisation and automation.
- Teleport: A stronger second quarter is anticipated, rebounding from the traditional 1Q slowdown. Teleport remains on track to deliver 2 million parcels daily by end-2025, supported by its asset-light model and technology investments. The company is well-positioned to benefit from the redirection of global trade and e-commerce flows towards Southeast Asia, offsetting potential softening in global air cargo yields.
- Other Businesses: Santan plans to expand from inflight to on-ground services and broaden its focus to FMCG. BigPay is refocusing on remittance, lending, and financial services within the ecosystem, attracting interest from potential banking partners. Abc. is expanding its remit to include brand communications consultancy. These realignments aim to sharpen business focus and unlock value across Capital A’s ecosystem.
Outlook for Aviation (Discontinuing Operations)
Despite the planned disposal, the aviation segment remains optimistic:
- Travel demand across key ASEAN markets is expected to remain robust for the rest of the year, driven by the summer peak season and holidays.
- Favorable jet fuel prices are expected to ease cost pressures, allowing for capacity ramp-up to meet demand and drive market share while maintaining high load factors.
- Domestic resilience is being strengthened in Malaysia and Thailand, with improved performance also expected in Indonesia, the Philippines, and Cambodia through network optimization and a strategic balance of domestic and international routes.
- Fleet reactivation is now targeted for July 2025, slightly delayed due to supply chain issues, but new aircraft inductions this year should help mitigate the impact.
- While tourist arrivals from China remain soft, capacity is being shifted to other lucrative markets to balance demand. The India-Pakistan conflict currently does not affect AirAsia’s core ASEAN network.
FY2025 Targets and Progress
The company provided the following internal targets for FY2025 and their progress in 1Q25:
| Category | Capital A Companies (Continuing Operations) FY25 Target | Capital A Companies (Continuing Operations) 1Q25 Actual | Progress (Continuing Operations) | AirAsia Aviation (Discontinuing Operations) FY25 Target | AirAsia Aviation (Discontinuing Operations) 1Q25 Actual | Progress (Discontinuing Operations) |
|---|---|---|---|---|---|---|
| Revenue (RM bil) | 3.5-4 | 0.78 | Tracking | 22-24 | 4.91 | Tracking |
| EBITDA (RM bil) | 0.5-0.6 | 0.10 | Tracking | 4-4.8 | 0.98 | Tracking |
| NOP margin | 7-10% | 5.2% | Tracking | 3-5% | 4.9% | Tracking |
The Group’s performance in 1Q25 indicates that both its continuing and discontinuing operations are broadly tracking their FY2025 targets.
Summary and Outlook
Capital A’s first quarter 2025 report paints a picture of a company in purposeful transition. The significant swing to profit before tax for the overall Group, coupled with robust growth in its continuing operations, highlights the strategic value of its diversified portfolio beyond just aviation. The non-aviation segments like Teleport, ADE, and AirAsia MOVE are demonstrating strong individual growth trajectories, positioning them as future engines for the company.
While the ongoing corporate restructuring to exit PN17 status faces some temporary delays, the underlying progress and shareholder approvals are encouraging. The company’s focus on cost optimization, strategic expansion in high-demand areas, and leveraging its ecosystem are clear positive factors. The aviation segment, despite being a discontinuing operation, continues to perform strongly, benefiting from favorable market conditions and internal efficiencies.
Key points from this report include:
- Strong Profit Turnaround: The Group moved from a significant loss to a substantial profit before tax, driven by improved operational performance and favorable foreign exchange movements.
- Robust Growth in Continuing Operations: Non-aviation businesses are showing impressive revenue and EBITDA growth, signaling their potential as the future core of Capital A.
- Strategic Restructuring on Track: Despite minor delays, the capital reduction and disposal of the aviation business are progressing, which is crucial for the company’s financial health and future focus.
- Optimistic Outlook: Both continuing and aviation segments anticipate sustained demand and are implementing strategies to capture market share and enhance efficiency.
From a blogger’s perspective, Capital A’s Q1 2025 report is a testament to its resilience and strategic foresight. The company is not just navigating challenges but actively reshaping its identity to unlock new value. The emphasis on its digital and logistics arms suggests a future less reliant on the volatile aviation sector, which could offer more stable and diversified revenue streams.
The journey to fully de-consolidate the aviation business and solidify the new core segments will be crucial to watch. Do you think Capital A can maintain this growth momentum in its non-aviation businesses and successfully complete its corporate restructuring by 3Q25? Share your thoughts in the comments below!
Stay tuned for more updates on Capital A’s journey and other exciting developments in the Malaysian market. You might also find our recent analysis on the Malaysian E-commerce Landscape or ASEAN Travel Recovery Trends insightful.
