Affin IB Research upgrades MAS to Trading Buy, raises target price

Affin IB Research upgrades MAS to Trading Buy, raises target price
Business & Markets 2013
Written by Shalini Kumar of theedgemalaysia.com
Tuesday, 09 April 2013 10:10


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KUALA LUMPUR (Apr 9): Affin IB Research has upgraded Malaysian Airlines Systems Bhd (MAS) to a Trading Buy at 64 sen and raised its target price to 83 sen from 64 sen previously, following the completion of the group’s long range wide body re-fleeting exercise.

In April 2013, MAS took delivery of its sixth A380-800, to replace the ageing Boeing 747-400 fleet.

In a note today, Affin IB analyst Sharifah Farah said the research house was expecting stiffer competition for the airline, despite the improving operating statistics and the airline’s new fleet programme.

“With three legacy airlines – Air France, Turkish Airlines and Philippines Airlines returning to KLIA and potentially two more airlines in the next few months – Qantas and British Airways, we expect competition to be stiffer amongst legacy airlines especially to international destinations,” she said.

“In addition, although the price of jet fuel has been stable, it remains lofty at an average of US$128/barrel in 1Q13 vs. US$130/barrel in 1Q12. Our earnings model imputes in a jet fuel assumption of US$120 per barrel for FY13 and US$125 per barrel for FY14,” she added.

Farah added that although the group’s fundamentals “are still frail” most of the negative news was already reflected in its share price.

“We expect the airline to turnaround in FY13 on the back of the group’s continuous effort in cost improvement and at the same time improving revenue,” she said.

At 9.32 am, MAS was trading half a sen lower at 76 sen with 544,300 shares done.