MAS losses could worsen sequentially in 2Q14, says CIMB Research

by **Cals** Fri 16 May 2014, 17:30

Business & Markets 2014

Written by theedgemalaysia.com

Friday, 16 May 2014 09:52

KUALA LUMPUR (May 16): CIMB Research has maintained its Reduce rating on Malaysian Airline System Bhd (MAS) at 21 sen with a target price of 14 sen and said MAS’s losses may worsen sequentially in 2Q14 as MAS abstained from all marketing activities for two months following MH370, likely leading to a bigger decline in INTL yields as China sales collapsed 60% during March.
In a note Friday, the research house said sales in advance of carriage, classified as current liabilities on the B/S, fell 12% quarter-on-quarter (q-o-q) and 8% year-on-year (y-o-y), suggesting a weaker forward booking profile.
It said this would necessitate fare promotions to push up sales volumes.
CIMB Research said MAS’s 1Q14 core net loss of RM426 million, at 28% of house full-year forecast, was broadly in line since the 2H was seasonally stronger.
The research house said MAS was heading towards its largest annual loss since the Global Financial Crisis of 2009, and clearly, its management and Khazanah were working towards a deep restructuring.
“But unless we can put our finger on the details, we retain our Reduce call with an unchanged target price of 14 sen (1x CY14 P/BV).
“We tweak our loss forecast for FY14 down slightly on offsetting adjustments, and lower FY15-16 losses by 13-26% on the assumption of gradual yield recovery and more fuel efficiencies.
“Potential de-rating catalysts include the persistent losses, and the long and difficult road ahead even if there is the political will to restructure,” it said.