Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: AMMB
Malaysian Airline System Bhd
(June 17, RM2.07)
Maintain buy at RM2.04 with fair value of RM3.50: We retain our buy rating on Malaysia Airlines (MAS) and maintain our fair value of RM3.50 per share, which continues to peg MAS at 1.8 times FY10F book value, in line with historical average.
MAS is expected to introduce a new class of product, namely 'premium economy' seats for its incoming A380 fleet in FY12. MAS' new A380s will entail its first, four-class seating configuration ie first, business, premium economy and economy classes.
Introduction of premium economy emulates moves by FSC (full service carrier) peers like Qantas, British Airways and Air France. Premium economy seats are typically 35%-85% more expensive than economy but 65% cheaper than business class'' and with several extra offerings versus typical economy seats.
MAS aims to capture market share from Middle Eastern carriers for long-haul routes between Asia and Europe. Notably, business class seating of Middle Eastern carriers entail relatively smaller seat pitch compared to MAS' and other carriers' business class configuration.
Additionally, MAS is one of the first Asian carriers to introduce premium economy class in its fleet.
The significance of this move is that MAS seems to be switching to an offensive strategy which has not been the case over the past half decade, given MAS' constraint in its financial restructuring and setbacks of an old operating fleet.
Separately, MAS is planning to order either the A350 or B787, on top of existing firm orders for B737-800s, A330s and A380s. The new aircraft type is positioned in between the A380 and A330 fleet which entail a large gap in terms of seating capacity (525 seats for A380s versus 295 seats for A330s).
Our projections are maintained at this juncture as MAS' A380 fleet is only expected to arrive in FY12F while the number of additional fleet to be ordered is still uncertain at this juncture.
Nonetheless, over the longer term, we would expect structural yield enhancement from market share wins and potential uptrading from existing economy seats.
Valuation-wise, MAS has been a laggard in the sector's cyclical recovery where it is still trading at a deep 50% discount to historical average PBV of 1.8 times. Regional peers on the other hand have, since late 2009, converged to historical average valuations. ' AmResearch, June 17
This article appeared in The Edge Financial Daily, June 18, 2010.
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: AMMB
Malaysian Airline System Bhd
(June 17, RM2.07)
Maintain buy at RM2.04 with fair value of RM3.50: We retain our buy rating on Malaysia Airlines (MAS) and maintain our fair value of RM3.50 per share, which continues to peg MAS at 1.8 times FY10F book value, in line with historical average.
MAS is expected to introduce a new class of product, namely 'premium economy' seats for its incoming A380 fleet in FY12. MAS' new A380s will entail its first, four-class seating configuration ie first, business, premium economy and economy classes.
Introduction of premium economy emulates moves by FSC (full service carrier) peers like Qantas, British Airways and Air France. Premium economy seats are typically 35%-85% more expensive than economy but 65% cheaper than business class'' and with several extra offerings versus typical economy seats.
MAS aims to capture market share from Middle Eastern carriers for long-haul routes between Asia and Europe. Notably, business class seating of Middle Eastern carriers entail relatively smaller seat pitch compared to MAS' and other carriers' business class configuration.
Additionally, MAS is one of the first Asian carriers to introduce premium economy class in its fleet.
The significance of this move is that MAS seems to be switching to an offensive strategy which has not been the case over the past half decade, given MAS' constraint in its financial restructuring and setbacks of an old operating fleet.
Separately, MAS is planning to order either the A350 or B787, on top of existing firm orders for B737-800s, A330s and A380s. The new aircraft type is positioned in between the A380 and A330 fleet which entail a large gap in terms of seating capacity (525 seats for A380s versus 295 seats for A330s).
Our projections are maintained at this juncture as MAS' A380 fleet is only expected to arrive in FY12F while the number of additional fleet to be ordered is still uncertain at this juncture.
Nonetheless, over the longer term, we would expect structural yield enhancement from market share wins and potential uptrading from existing economy seats.
Valuation-wise, MAS has been a laggard in the sector's cyclical recovery where it is still trading at a deep 50% discount to historical average PBV of 1.8 times. Regional peers on the other hand have, since late 2009, converged to historical average valuations. ' AmResearch, June 17
This article appeared in The Edge Financial Daily, June 18, 2010.
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