Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Malaysian Airline System Bhd
(Aug 1, RM1.52)
Maintain market perform at RM1.48 with fair value of RM1.68: MAS guided a passenger capacity growth rate of 5% to 8% for FY11 ending December, driven largely by the scheduled aircraft delivery of four B737-800s and seven A330-300/200Fs, partially offset by the phasing out (returning to the lessor) of the older and less fuel-efficient B747-400 and B737-400 aircraft.
MAS reiterated there is no need for a cash call in FY11 as funding for the scheduled aircraft delivery in 2011 has already been put in place. For the very heavy 2012, scheduled aircraft delivery of seven B737-800s, seven A330-300/200Fs and five A380-800s, MAS is still weighing options. We hold the view that some form of fundraising seems inevitable given the lumpy cost of RM6.5 billion based on our estimate.
MAS' management did not give us the impression that controlling shareholder Penerbangan Malaysia Bhd/Khazanah Nasional Bhd is breathing down its neck despite the disappointing 1QFY11 results. This eases concerns on the continuity of the top management, and hence business strategy and direction.
We maintain our forecasts but the risks to our view include: (i) a lower than expected rise in MAS' yields; (ii) higher jet fuel cost; and (iii) the inability to contain outbreaks of pandemic diseases.
We expect MAS to turn around in FY12, driven largely by rising yields on the back of the rollout of higher yielding products (particularly those at the front end) from its new aircraft, partially offset by the sustained high fuel cost. Indicative fair value is RM1.68 based on 1.7 times book value, at a premium to its regional peers' average of 1.5 times to reflect strong trading sentiment on potential mergers and acquisitions including privatisation. ' RHB Research, Aug 1
This article appeared in The Edge Financial Daily, August 2, 2011.
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
| Research House: RHB | Price Call: HOLD | Target Price: 1.68 |
Malaysian Airline System Bhd
(Aug 1, RM1.52)
Maintain market perform at RM1.48 with fair value of RM1.68: MAS guided a passenger capacity growth rate of 5% to 8% for FY11 ending December, driven largely by the scheduled aircraft delivery of four B737-800s and seven A330-300/200Fs, partially offset by the phasing out (returning to the lessor) of the older and less fuel-efficient B747-400 and B737-400 aircraft.
MAS reiterated there is no need for a cash call in FY11 as funding for the scheduled aircraft delivery in 2011 has already been put in place. For the very heavy 2012, scheduled aircraft delivery of seven B737-800s, seven A330-300/200Fs and five A380-800s, MAS is still weighing options. We hold the view that some form of fundraising seems inevitable given the lumpy cost of RM6.5 billion based on our estimate.
MAS' management did not give us the impression that controlling shareholder Penerbangan Malaysia Bhd/Khazanah Nasional Bhd is breathing down its neck despite the disappointing 1QFY11 results. This eases concerns on the continuity of the top management, and hence business strategy and direction.
We maintain our forecasts but the risks to our view include: (i) a lower than expected rise in MAS' yields; (ii) higher jet fuel cost; and (iii) the inability to contain outbreaks of pandemic diseases.
We expect MAS to turn around in FY12, driven largely by rising yields on the back of the rollout of higher yielding products (particularly those at the front end) from its new aircraft, partially offset by the sustained high fuel cost. Indicative fair value is RM1.68 based on 1.7 times book value, at a premium to its regional peers' average of 1.5 times to reflect strong trading sentiment on potential mergers and acquisitions including privatisation. ' RHB Research, Aug 1
This article appeared in The Edge Financial Daily, August 2, 2011.
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