Malaysia Airlines (MAS) shares went up two
sen on reports suggesting that the airline may be privatised by Khazanah
Nasional Limited.
But in
a late press statement yesterday, Khazanah dismissed the reports as
“speculative”.
“A
comprehensive review of restructuring options for MAS is being undertaken and
evaluated,’’ it said.
“The
resolution of this review will be made after due consideration and after
respective approvals from the relevant parties and authorities, including the
approval of the special shareholder, finance minister, Incorporated.”
MAS
shares shot up to as high as 24.5 sen yesterday, the highest single-day spike
since October 2007, although it subsequently ended the day at 23 sen, with
19.419 million shares changing hands.
MAS
told Bursa Malaysia yesterday: “As of now, MAS is not aware of any decision
that has been made by both of them (Khazanah and the government) on this
matter.’’
The
market is already pricing that a drastic decision needs to be taken to save
MAS.
Maybank
Investment Bhd senior analyst Mohshin Aziz said that even if MAS were to be
privatised in six months’ time as speculated, “we think it might be a tad too
late as the company would have exhausted its cash resources and its gearing
level would have risen to more than five times.’’
He
reiterated that MAS had a cash burn rate of around 5 million ringgit (US$1.57
million) a day.
The
airline had a cash hoard of 3.1 billion ringgit ($971.8 million) as at the end
of last year.
“We do
not think it can reverse this any time soon due to weak markets and the
aftermath of MH370,’’ Mohshin said in a research note.
He
continues to have a “sell” call on the stock with a fair value at 12.5 sen a
share based on a price to book value of 1.0 times.
“We are
convinced that MAS needs to make another round of capital raising… and
therefore see no reason for anyone to own this stock for now,’’ Mohshin said.
On
Wednesday, a newswire report quoting sources said Khazanah planned to take MAS
private as the first step in a major restructuring and that a de-listing of MAS
from the stock exchange would pave the way for the revival of the ailing
airline.
The
report speculated that the exercise would involve the sale of MAS’ profitable
engineering, airport services and budget airline units.
It
would also entail trimming MAS’ workforce and the installation of a new
management team.
Khazanah
managing director Azman Mokhtar had said last month that it was considering all
options and would unveil a restructuring plan within six to 12 months.
MAS has
been making losses for several years and the disappearance of flight MH370 has
thrown it into a tailspin requiring urgent restructuring, insiders say.
Newly-appointed
transport minister Liow Tiong Lai is expected to meet MAS management next week
on critical changes needed for MAS to make its business viable.
Post-MH370,
MAS has seen a slide in bookings. For its May monthly operating statistics, MAS
experienced about a 10 percentage points drop in its international load factor.
MIDF
Research said the drop suggested the adverse impact of MH370 and estimated that
MAS’ net core losses would rise from the first quarter’s 342 million ringgit
($107.2 million) to between 400 million ringgit ($125.4 million) and 500 million
($156.7 million) in the next few quarters.
It also
maintained a “sell” call on MAS shares. Of the 15 research houses tracking the
company, 13 have a “sell’’ call and two a “hold” call.
B. K.
Sidhu
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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