Stock Focus MAS rises on turnaround strategy

by **Cals** Fri 25 Oct 2013, 12:57

Stock Focus MAS rises on turnaround strategy

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 25 October 2013 11:08

KUALA LUMPUR (Oct 25): Malaysian Airline System Bhd (MAS) saw its shares rise as much as one sen or 3% in morning trades as its management’s strategy is seen to turn around the airline’s performance.

In fact, the stock has been inching up gradually from 31 sen in late August, sometimes with heavy trades.

At 10.50 am today, MAS was trading at 35.5 sen after climbing 0.5 sen or 1.4% on trades of some 13 million shares. It was the sixth most active counter.

In a note today, RHB Investment Bank Bhd said the management’s strategy “is on the right track towards boosting MAS’ profitability” and helping the carrier potentially breakeven by FY14, as per management guidance.

RHB IB research analyst Jerry Lee said the national airline’s promising operating statistics, as shown by its September numbers, prove the airline’s strategy to improve profitability is bearing fruit.

But Lee said he is maintaining ‘neutral’ on MAS at 35 sen with fair value of 34 sen, derived from an unchanged 9 times adjusted FY14F EV/EBITDAR.

“These improvements are in line with management’s strategy to turn around by increasing the carrier’s capacity and applying a ‘load active, yield passive’ strategy to improve profitability,” said Lee.

“To top that, Visit Malaysia 2014 may augur well with its strategy, although intense competition persists.”

He said the government has earmarked 2014 as Visit Malaysia Year in its efforts to promote Malaysia as a major tourist attraction and boost passenger traffic.

“Although all airlines, including MAS, may continue to face challenges in the pricing of airfares, the high passenger traffic will complement MAS’ strategy to fill up its aircraft,” Lee said.

“While we do not expect to see exponential growth in earnings, the high passenger traffic will still translate into a high load factor for MAS and hence, enhance the carrier’s profitability.”

Nevertheless, Lee cautioned that fluctuations in the foreign currency rates as well as jet fuel prices, together with a competitive operating environment, are key risks to MAS’ turnaround plans.

Meanwhile, Kenanga Research said in a note that the national carrier will see immediate technical support and resistance levels at 35 sen and 36 sen respectively.