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Saturday, March 2, 2013

Analysts impressed byMAS improved quarterly results, operating statistics


PETALING JAYA: Analysts remain upbeat with Malaysia Airlines' (MAS) prospects going forward and the carrier's improved quarterly results that came within their expectations.
At least two research houses have upgraded their call on MAS although most houses still have maintained a “sell” call.
Analysts said improved operating statistics were among the factors that brought the flag carrier back on track and that investors remained concerned over MAS' proposed rights issue and the sustainability of its earnings recovery.
“Valuation wise, we think the stock has fallen to a more attractive level. With a potential upside of 22.4%, we upgrade our recommendation to buy' from sell',” TA Securtities said in a report.
TA pointed out that the key risk factors to its call were slower-than-expected recovery in passenger's growth, outbreak of severe global pandemic and spike in fuel prices.
The research house said MAS' share price had “underperformed, losing as much as 15%” of its value in the past three months.
“We believe this was due to concerns over the proposed rights issue and the sustainability of its earnings recovery.”
MAS posted a net profit of RM51.4mil for the fourth quarter ended Dec 31, 2012, against a net loss of RM1.27bil in the same period a year ago. For the fourth quarter, MAS' revenue rose 5.1% to RM3.87bil from RM3.68bil a year earlier.
Revenue for the whole of financial year 2012 (FY12), however, fell marginally to RM13.76bil from RM13.9bil. Its net loss narrowed to RM432.6mil from a record RM2.52bil in FY11.
TA Securities said it was now projecting MAS to record higher net profit of RM73mil and RM241mil for FY13 and FY14 respectively driven by higher unit revenue assumption of 26.4 sen revenue passenger kilometre (RPK) and 26.9 sen per RPK respectively.
“Our earnings revisions are premised on better efficiencies with the usage of new aircraft, improvement in load factor and yields after joining One World Alliance starting Feb 1,” it added.
Maybank Investment Bank Research said while MAS' FY12 core net loss of RM571mil was in line with the research firm's estimates, the numbers had outperformed consensus estimate of an over RM700mil loss.
It said the airline which has managed to stem losses since the third quarter, appeared to have turned the corner in the fourth quarter in view of a successful business turnaround.
“The fourth quarter 2012 net profit of RM51.8mil was significantly better than fourth quarter 2011's loss of RM1.27bil. The drivers were better yields and load factors achieved.
“Unit cost has risen by 0.7% year-on-year due to higher overheads and business restructuring costs. More importantly, operating cashflow of RM35.3mil affirms that the business has turned around and is generating positive returns,” Maybank said.
Maybank expects MAS to grow modestly in 2013. The airline will have net reduction of six aircraft in 2013 (dispose of 22 aircraft and receive 16 new aircraft).
“This fleet rejuvenation exercise will bring down its average fleet age to about seven years which is similar to industry leaders such as Singapore Airlines and Emirates. Capacity will likely remain flattish despite the lower fleet size, as MAS will boost utilisation rates on the new aircraft.”
Meanwhile, MAS will convene an EGM next week to seek shareholders' approval for a rights issue to raise RM3.1bil. The corporate exercise is expected to be completed by May 2013.

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