Capital A’s ADE secures US$100m from OCP Asia to build MRO facility

KUALA LUMPUR: Capital A Bhd’s engineering and maintenance subsidiary, Asia Digital Engineering (ADE), has secured US$100 million (RM445 million) investment from Hong-Kong-based investment firm OCP Asia Ltd to be utilised for the construction and operation of a state-of-the-art 14-line aircraft maintenance hangar facility in Sepang, Selangor.

The investment will also be allocated for ADE’s business expansion in other verticals and geographical markets.

Capital A CEO Tan Sri Tony Fernandes said the initial plan was to build a 14-line hangar facility. However, with the investment in place, it gives the group “the ability to expand (the facility) to 20 lines” which he reckoned would grow within three years.

“These 14 lines generate cash flow, which gives us more cash build. So, the US$100 million allows us to build a bigger business, which generates cash flow (which could be) reinvested into more lines,” he said during a press conference today after a signing ceremony between ADE and OCP Asia, which was witnessed by Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz.

Fernandes expects the maintenance, repair and overhaul (MRO) facility to cater to AirAsia aircraft, as well as those of other airlines.

On profit contribution for the group, he remarked that ADE will be a “significant” contributor.

“I think within four or five years, if the group stays as it is, it would contribute 30% to 40% on the profits,” he said.

ADE CEO Mahesh Kumar said there are two phases that are concurrently being constructed, with Phase 1 to be completed by early second-quarter 2024 and Phase 2 by early third-quarter 2024.

The 21-acre facility will be the first MRO hangar facility to be wholly owned by the group. Currently, ADE has two facilities, located in Subang and Johor Bahru, on lease.

Meanwhile, Tengku Zafrul said Malaysia has a thriving MRO sector, which offers numerous investment opportunities.

“In 2022, Malaysia secured RM600 million worth of MRO expansion projects involving heavy maintenance and components MRO activities, by various reputable companies operating in the country. This indicates that investors from both within and outside Malaysia see our MRO sector as an investment opportunity with significant potential for growth.

“According to an industry report, the size of Malaysia’s MRO sector is estimated to increase from US$1.5 billion in 2020 to US$2.5 billion by 2026, growing at a compound annual rate of 8.5% during the period,” he added.

Tengku Zafrul said the investment will set a new benchmark for the MRO sector in the region because the facility will utilise 4IR technologies such as robotics and predictive maintenance backed by artificial intelligence, which is expected to create new opportunities for Malaysian companies to develop their digital capabilities and stay ahead of the curve.

The minister said Capital A and ADE are examples of home-grown companies that are willing to invest, innovate and disrupt to stay ahead of the curve, particularly in a volatile business environment.

“They also prove that our local conditions are conducive not only for continued investments and growth, but also for establishing a regional hub for various hi-tech industry verticals. This partnership will also create new and higher-paying job opportunities for the local workforce and opportunities for localisation of other services by SMEs in the local supply chain,” said Tengku Zafrul.