Tuesday, September 20, 2011

MAS edges up in thin trade

KUALA LUMPUR: Shares of MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) edged up slightly at midday on Tuesday, Sept 20, when compared to the broader and cautious market.

At the midday break, it was up one sen to RM1.41. There were 571,000 shares transacted at prices ranging from RM1.38 to RM1.41. Year-to-date, it is down 32.2% from RM2.08 on Jan 3.

However, the share price is still higher than CIMB Equities Research's latest target price of RM1.60 and it is still maintaining an Underperform on the stock.

MAS recorded an operating loss of RM413 million year-on-year in 2Q ended June 30 compared to a RM286 million loss a year earlier, due mainly to higher fuel cost.

To recap, in the second quarter ended June 30, 2011 MAS posted net loss of RM526.68 million compared with net loss of RM534.73 million a year ago as it continued to be impacted by the high fuel prices.

For the six months ended June 30, MAS' net loss widened substantially to RM769.02 million from net loss RM224.68 million in 2010, despite posting higher revenue of RM6.68 billion, impacted adversely by higher fuel costs.

CIMB Research said it was maintaining its Underperform and target price of RM1.60 for MAS. While the cargo division may remain profitable, it cautioned that the passenger side is likely to be in the red at least until 2013, dragging the performance of entire group down.

'Our target price is derived from a P/BV multiple of 2.75x, one standard deviation above the 10-year mean. A major game changer for MAS in the medium- to long-term will be its impending entry into the oneworld alliance, where a potential tie-up with British Airways and Qantas could be a huge positive. Until then, we expect weak results to undermine MAS's share price performance,' it said.

On Monday, MAS'' received the first of four new A330-200F freighters. The second A330F will be delivered in November and another two in January and April of next year.

CIMB Research said MAS currently owns two B747-400Fs (B744Fs) and leases four B747-200Fs (B742F). Each of the four leased B742Fs will be returned when each new A330F freighter enters the fleet.

In the past, MAS leased all of its freighters, but in 2010, MAS purchased the two five-year old B747-400Fs that it currently owns from previous lessor PMB. Continuing the trend of ownership, MAS will place each of the four A330Fs on its balance sheet, at a book value of more than US$200 million each.

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