KUALA LUMPUR: Hong Leong Investment Bank Research maintain its Hold recommendation on MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) with Target Price of RM2.27.
It said on Tuesday, Nov 9 MAS' unit FlyFirefly plans to expand using 30 Boeing 737-800 jet aircraft. Firefly is currently profitable, but contribution to MAS is relatively insignificant with less than 5% to 1H10 revenue.
MAS management claimed to have competitive cost structure as compared to Airasia, enabling Firefly to price its fares competitively. MAS also said it did not require fund raising exercise for the expansion plan.
'Positive on Firefly expansion plan to defend MAS market share and leverage to MAS group operations to enjoy economies of scale. There might be potential market cannibalisation from MAS to Firefly,' it said.
However, HLIB Research said passengers would incur higher tariffs departing from KLIA's main terminal building.
The research house said Airasia would continue to be Southeast Asia largest LCC operator, with first mover advantage while offering largest regional routes connectivity.
'Key concern with MAS is on the execution risk,' it said.
It said on Tuesday, Nov 9 MAS' unit FlyFirefly plans to expand using 30 Boeing 737-800 jet aircraft. Firefly is currently profitable, but contribution to MAS is relatively insignificant with less than 5% to 1H10 revenue.
MAS management claimed to have competitive cost structure as compared to Airasia, enabling Firefly to price its fares competitively. MAS also said it did not require fund raising exercise for the expansion plan.
'Positive on Firefly expansion plan to defend MAS market share and leverage to MAS group operations to enjoy economies of scale. There might be potential market cannibalisation from MAS to Firefly,' it said.
However, HLIB Research said passengers would incur higher tariffs departing from KLIA's main terminal building.
The research house said Airasia would continue to be Southeast Asia largest LCC operator, with first mover advantage while offering largest regional routes connectivity.
'Key concern with MAS is on the execution risk,' it said.
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