Business

Friday November 27, 2009

Worst may be over for MAS

By LEONG HUNG YEE


Analysts: Its ability to cut losses and writedowns a positive sign

PETALING JAYA: Positive signs, including increasing passenger loads on Malaysia Airlines (MAS), indicate that the worst may be over for the national carrier.

As losses narrow and writedowns shrink, analysts believe the road ahead for MAS is brighter although the outlook for the next quarter is still uncertain.

“Airlines, both locally and worldwide, have experienced the toughest conditions in a year from October last year, having cut (orders for) planes, routes and employment but the environment is more stable now,” an analyst said, but felt that recovery would be slow.

For the third quarter ended Sept 30, MAS posted a net loss of RM299.6mil mainly due to a loss of RM202mil in derivative marked-to-market on fuel. MAS narrowed its operating loss to RM73mil for the quarter from RM421mil losses reported in the preceding quarter.

“The much improved financial and operating figures in the third quarter suggest that the worst may be over for MAS,” OSK said in a report yesterday.

It said MAS’ core loss of RM97.6mil for the three months ended Sept 30 was spot on with the brokerage estimates, representing an improvement of 79% quarter-on-quarter.

“Although the RM202mil in marked-to-market loss is not a major concern – and the worst seems to be over for the company – we are mindful of the persistent pressure on yield and a potential cash call for new aircraft purchase,” it said.

MAS’ nine months to Sept 30 core loss of RM700.9mil accounted for 83.4% of OSK and 60.4% of consensus loss projections, which was in line with OSK but it soundly beat consensus.

“Nevertheless, we are still cautious on MAS’ short- to medium-term performance given that overall yields of 22.4 sen in the third quarter were still 4.3% lower quarter-on-quarter. As such, we suspect it may take at least a quarter or two before average yield returns to breakeven level,” OSK said.

It added that the scheduled delivery of new aircraft also suggested a potential cash call that might eventually dampen investor sentiment.

AmResearch Sdn Bhd said although MAS was still in the red, the carrier reported a significant improvement in its latest quarterly results.

“At core operating level, MAS’ operating loss of RM73mil is an inch away from breakeven if compared with operating loss of RM421mil in the previous quarter,” it said, adding that MAS’ results were within expectation, but better than consensus.

It said this was the first time MAS had beaten broader analysts’ estimates since the start of the industry downturn in the fourth quarter.

“The earnings downgrade cycle for MAS appears to have reached a bottom and on the verge of an upward revision cycle – which is a strong re-rating catalyst for MAS’ share price,” it added.

AmResearch expects MAS to turn in profit next year driven by yield stabilisation and industry traffic recovery. Reflecting its optimism, it projected MAS to post a profit of RM354mil for the financial year ending Dec 31, 2010 compared with consensus net loss estimate of RM296mil.

Maybank Investment Bank Bhd, which expects MAS to return to profit soon, has upgraded the stock to “buy” call from “sell” previously. It has also increased the stock price to RM4.20 from RM2.50.

According to Bloomberg, more than 31% of analysts covering MAS recommended investors to either “buy” or “hold” MAS shares, with the rest having “sell” calls.


MAS : [Stock Watch] [News]


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