Airlines stocks dip in early trade

KUALA LUMPUR: Shares of MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) and AIRASIA BHD [] fell in early trade on Wednesday, Aug 24 after the airlines posted vastly different results but said that fuel prices remained a concern.

At 9.15am, MAS fell four sen to RM1.60 while AirAsia lost 11 sen to RM3.52.

MAS' net loss for the second quarter ended June 30, 2011 narrowed to 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.

AirAsia reported earnings of RM104.25 million in the second quarter ended June 30, 2011 as its operations were affected by higher fuel costs, which rose 31%. Net profit fell 47.5% from the RM298.93 million a year ago.

MIDF Research has cut its target prices for both airlines. It slashed MAS' FY11 and FY12 earnings significantly to reflect the expected poor performance ahead.

'Switching our valuation to price-to-book value (PBV) method as we expect MAS to be loss making in FY12, we arrive at a target price of RM1.60 pegged to 2.0 times PBV, which is the regional peers' average.

'We downgrade our recommendation to TRADING SELL as we believe MAS' poor 2Q11 performance will dampen sentiment towards the stock,' it said on Aug 24.

On AirAsia, the research house said it was tweaking its forecasts for FY11 and FY12 downwards by -28.8% and -19.0% to take into account the higher deferred tax and the lower forex gains.

'Rolling over our valuation to FY12, we arrive at a revised target price of RM4.15 (from RM4.60). We maintain our TRADING BUY recommendation as we believe that the good operational performance will stir interest in the stock in the near term,' it said.

MIDF Research said while it expects that global economic conditions to remain uncertain, it said AirAsia was well situated to weather the storm due to its position as a low cost carrier.

'Our target price is derived by pegging its FY11 EPS to PER of 12.8 times, which is a 25% premium to its peers,' it said.

CIMB Research maintains Underperform on MAS

KUALA LUMPUR: CIMB Equities Research maintained its Underperform call on MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) and maintained a target price of RM1.52.

It said on Friday, June 17 that MAS had, in a briefing on Thursday, reiterated on the benefits of its oneworld alliance membership.

The network would enable MAS tap into a global network of connectivity, a seamless travel experience, frequent flier benefits and airport lounge access.

'We agree that joining oneworld is the right move and a MAS-Qantas partnership through the alliance could form an effective counterweight to the recently announced SIA-Virgin Australia tie-up.

'But we continue to rate MAS an UNDERPERFORM as the 2Q loss is expected to be much larger than the 1Q loss and the benefits of the alliance will only start flowing through in 2013. We maintain our EPS forecasts and target price of RM1.52, which is based on 2x P/BV,' it said.

MAS holding steady despite 1Q losses, downgrades

KUALA LUMPUR: Shares of MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) were holding steady in late morning on Thursday, May 26 despite posting net loss of RM242.34 million in the first quarter ended March 31, 2011 versus net profit of RM310.04 million a year ago.

At 10.49am, it was unchanged at RM1.58. There were 1.02 million shares traded at prices ranging from RM1.56 to RM1.60.

CIMB Equities Research downgraded it'' from Outperform to Underperform and reduce the target price from RM2.30, based on 7.0 times core price-to-earnings,'' to RM1.52, pegged to 2.0 times price-to-book value.

'The shift to book valuation is necessary given the sharp reduction in our profit forecasts. We recommend a switch to AirAsia,' it said.

Meanwhile, OSK Research said MAS's core net loss of RM306.9 million was substantially below its and consensus estimates.

'The airline faces a tough challenge in the form of poor load factors, negative yield growth and higher jet fuel costs. We downgrade our earnings to a core net loss of RM94.2 million as we cut capacity on the back of a worse than expected blow from soaring jet fuel price. We downgrade FV to RM1.10 with our SELL call maintained,' it said.