Move Digital restructuring seen strengthening Capital A balance sheet

KUALA LUMPUR: Capital A Bhd's proposed restructuring of its unit Move Digital Sdn Bhd is expected to strengthen its balance sheet and sharpen its focus on core businesses, Public Investment Bank said.

Its analyst Denny Oh said the proposed capital structure optimisation exercise was not expected to have a material financial or operational impact on Capital A, as losses from its digital businesses, including Big Pay, had already been fully recognised in the company's accounts.

Move Digital holds a 99.56 per cent stake in Big Pay Pte Ltd and a 13.6 per cent interest in Tune Protect Group Bhd.

It has net liabilities of about RM292 million, mainly comprising intragroup liabilities, and faces arbitral awards requiring it to acquire Big Pay's minority shares for US$14.7 million and pay costs of US$4.1 million, plus interest.

Under the proposed scheme of arrangement, Move Digital would seek to settle creditors' claims over a period of up to three years.

Oh said the settlement could be funded through the market-driven divestment of Big Pay, the orderly sale of Move Digital's stake in Tune Protect and the recovery of about RM32.2 million in related-party receivables.

The proceeds would be distributed primarily to Capital A and its related companies, subject to regulatory and court approvals.

"The proposed scheme and moratorium are not expected to have a material adverse financial or operational impact on the group," Oh said in a research note.

He said any disposal or transfer of Move Digital's equity interest in Big Pay was also unlikely to have a material impact on Capital A, given that Big Pay's historical losses had already been recognised in the company's financial statements.

The proposed scheme remains at a preliminary stage and is subject to further assessment, including the validation of assets and receivables, creditor engagement and ultimately court sanction.

The scheme is also intended to be recognised in Singapore.

"No material financial or operational impact on the group is expected and the deconsolidation of Big Pay's historical losses should strengthen the group's balance sheet and allow greater focus on its core businesses," he said.

Oh maintained his "Outperform" call on Capital A with an unchanged target price of 55 sen.