Hot Stock MAS rises 8% but rumour-driven gains seen unsustainable

by **Cals** Fri 20 Jun 2014, 01:48

Hot Stock MAS rises 8% but rumour-driven gains seen unsustainable

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Thursday, 19 June 2014 11:44

KUALA LUMPUR (June 19): Malaysian Airline System Bhd (MAS) extended gains on news reports that the loss-making company may establish a collaboration with Abu Dhabi-based Etihad Airways.

These reports followed a commitment by MAS' controlling shareholder Khazanah Nasional Bhd to revive the airline. Government investment arm Khazanah owns 69.37% in MAS.

At 11.03am, MAS was traded at 26.5 sen with some 189 million shares done. The bourse's most active stock had earlier gained as much as two sen or 8% to 27 sen.

Yesterday, MAS rose three sen or 14% to close at 25 sen.

Today, however, remisiers said they doubted whether the rise in MAS shares was sustainable because the gains were driven by market rumours.

"I am very doubtful," said a remisier to theedgemalaysia.com over telephone when asked to comment on the stock's rise.

Earlier, news reports had indicated that MAS and Etihad were deliberating over a plan which might see Etihad acquiring a stake in MAS.

But that could be a challenge, the reports said, as the Malaysian government was seen as unwilling to reduce its stake in MAS.

Today, AmResearch Sdn Bhd raised the same point when it wrote in a note that "the willingness for Malaysia to relinquish some of its stake in the national airline could also be an issue".

The research house concluded thus based on past negotiations.

"Notably, Etihad currently has no equity alliance with a Southeast Asian airline. However, it is difficult to ascertain the rumours on the MAS-Etihad partnership and the depth of such a partnership at this juncture.

"Nonetheless, talk of MAS’ partnership with foreign carriers is not new, involving names such as Australia’s Qantas in the past," AmResearch said.

AmResearch is maintaining its "sell" call for MAS shares with an unchanged fair value of 27 sen. MAS' net loss widened to RM443.4 million in the first quarter ended March 31, 2014 from a net loss of

Khazanah Managing Director Tan Sri Azman Mokhtar has said earlier this month the government was committed to formulating a revival plan for the airline within the next 12 months.

According to Reuters, a slump in business since the disappearance of flight MH370 left the carrier set to exhaust its cash reserves by mid-2015.