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Published: Wednesday June 13, 2012 MYT 10:56:00 AM

MAS shares up after it secures takers for RM2.5b Sukuk


KUALA LUMPUR: Malaysian Airline System Bhd's (MAS) share price rose to a high of RM1.19 on Wednesday after it secured enough takers for its RM2.5bil 10-year perpetual sukuk and plans to unveil a new business plan next week.

At 10.57am, MAS shares were up four sen to RM1.16. There were 1.99 million shares done at prices ranging from RM1.14 to RM1.19.

The call warrants, MAS-CG added 0.5 sen to three sen with 11.24 million units done.

The FBM KLCI rose 2.23 points to 1,578.30. Turnover was 171.67 million shares valued at RM216.47mil. There were 281 gainers, 163 losers and 239 counters unchanged.

Affin Equities Research said the development was positive for MAS, in our view. Apart from lifting confidence, the deal also helps to provide sufficient fund for its critical working capital at least over the next two years to continue its operations and remain relevant.

Under the Malaysian accounting standards, the perpetual sukuk will be recognised as an equity capital. As such, based on its forecast, the RM2.5bil issuance will improve MAS's FY12 gearing level to 2.0 times from 5.7 times currently.

Affin Research said MAS's additional annual interest expense from the 6.9% sukuk will work out to RM172.5mil.

The research house said it was leaving its earnings forecast unchanged at this juncture.

"The ability of MAS to secure funding is positive development for the group. However, given the stiff pricing competition regionally, high fuel price environment and expensive valuation, we maintain our SELL call on MAS," it said.

Affin Research said its target price of 85 sen values the group at FY13 price-to-book value (PBV) multiple of 2.0 times (regional average at 0.8 times P/BV) and 8.8 times EV/EBITDA multiple, twice the average regional multiple of 4.4 times.

"We believe the premium is justified given the support shown from its existing shareholers. Risks to our call is a quick recovery in the global economic environment which will spur premium seats sales as well as a smooth and efficient execution of its transformation plans," said Affin Research.

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