Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: MAYBANK
Malaysian Airline System Bhd
(April 18, RM1.83)
Maintain buy at RM1.82 with target price of RM2.55: The unveiling of the latest A330-300 livery was striking; the cabin is a quantum leap improvement and on par with industry bests such as SIA and Qatar Airways. This is the exact medicine needed to bring MAS back to the top, and we think the benefits will start to show immediately.
No impact to our earnings forecasts and we maintain our 'buy' recommendation with a target price of RM2.55, implying 4.4 times 2012 earned value/earnings before interest, taxes, depreciation, amortisation, and restructuring or rent (Ebitdar), 10% premium to global peers for its significantly higher growth prospects.
MAS spared no expense to ensure everything looks classy. The seats are from Recaro ' reputed to be the Rolls-Royce of seats ' and the in-flight entertainment system is by Panasonic, winner of best in-flight entertainment system award in 2009.
It is very difficult to find fault with this aircraft as everything looks immaculate. We hope our next business flight will be in this aircraft, as did the majority of the crowd at the launch based on our eavesdropping.
MAS has a firm order for 15 A330-330 with options to acquire a further 10. It will receive five aircraft in 2011 and the remainder will be staggered up till 2015. The maiden route is Brisbane (Australia) followed by several routes to North Asia, then South Asia and Middle East. The A330-300 aircraft provides superior cost economics for medium-haul flights up to eight hours.
We estimate this new aircraft will provide 8% to 12% unit cost savings over the older aircraft it replaces stemming from its superior fuel efficiency and higher payload capabilities.
Furthermore, we think passengers won't mind paying a little more for what is a significantly much better product.
The outlook for MAS remains challenging but the transformation is intact. The industry is suffering from higher fuel prices and the markets have been quick to penalise the share price.
We think that the share price plunge (down 11% year-to-date) is exaggerated and does not value the benefits of new aircraft and the ability MAS has to absorb higher fuel prices. Our forecasts assume average US$115 per bbl for 2011. ' Maybank IB Research, April 18
This article appeared in The Edge Financial Daily, April 19, 2011.
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: MAYBANK
Malaysian Airline System Bhd
(April 18, RM1.83)
Maintain buy at RM1.82 with target price of RM2.55: The unveiling of the latest A330-300 livery was striking; the cabin is a quantum leap improvement and on par with industry bests such as SIA and Qatar Airways. This is the exact medicine needed to bring MAS back to the top, and we think the benefits will start to show immediately.
No impact to our earnings forecasts and we maintain our 'buy' recommendation with a target price of RM2.55, implying 4.4 times 2012 earned value/earnings before interest, taxes, depreciation, amortisation, and restructuring or rent (Ebitdar), 10% premium to global peers for its significantly higher growth prospects.
MAS spared no expense to ensure everything looks classy. The seats are from Recaro ' reputed to be the Rolls-Royce of seats ' and the in-flight entertainment system is by Panasonic, winner of best in-flight entertainment system award in 2009.
It is very difficult to find fault with this aircraft as everything looks immaculate. We hope our next business flight will be in this aircraft, as did the majority of the crowd at the launch based on our eavesdropping.
MAS has a firm order for 15 A330-330 with options to acquire a further 10. It will receive five aircraft in 2011 and the remainder will be staggered up till 2015. The maiden route is Brisbane (Australia) followed by several routes to North Asia, then South Asia and Middle East. The A330-300 aircraft provides superior cost economics for medium-haul flights up to eight hours.
We estimate this new aircraft will provide 8% to 12% unit cost savings over the older aircraft it replaces stemming from its superior fuel efficiency and higher payload capabilities.
Furthermore, we think passengers won't mind paying a little more for what is a significantly much better product.
The outlook for MAS remains challenging but the transformation is intact. The industry is suffering from higher fuel prices and the markets have been quick to penalise the share price.
We think that the share price plunge (down 11% year-to-date) is exaggerated and does not value the benefits of new aircraft and the ability MAS has to absorb higher fuel prices. Our forecasts assume average US$115 per bbl for 2011. ' Maybank IB Research, April 18
This article appeared in The Edge Financial Daily, April 19, 2011.
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