MAS stock soars as analysts urge investors to accept offer

by **Cals** Tue 12 Aug 2014, 22:53

Business & Markets 2014

Written by Kamarul Anwar of theedgemalaysia.com

Tuesday, 12 August 2014 09:35

KUALA LUMPUR: Malaysian Airline System Bhd (MAS) was the third most active stock on Bursa Malaysia yesterday, rising to its highest intraday level of 26.5 sen in five months, after sovereign fund Khazanah Nasional Bhd laid out an offer to privatise the ailing national carrier by way of selective capital reduction (SCR).

MAS closed at 26 sen yesterday, which was two sen or 8.33% higher than last Thursday’s close and a hair’s breadth from Khazanah’s offer price of 27 sen per share. Its market capitalisation stood at RM4.34 billion. The counter was suspended last Friday to make way for the announcement of the privatisation plan.

Yesterday, MAS’ counter saw 244.84 million shares done.

Analysts and remisiers are positive on Khazanah’s offer price of 27 sen per MAS share, given that many of them had previously set target prices in the “teens”. The offer is also 28.57% higher than MAS’ latest book value per share of 21 sen.

Goh Kay Chong, a senior remisier at SJ Securities Sdn Bhd, said with the offer price being 17.39% higher than last Thursday’s closing and was higher than the closing prices of the past few months, Khazanah is providing an attractive offer for MAS shareholders to exit from the counter.

“The offer price [of 27 sen apiece] is way higher than the recent market price. It is definitely attractive,” he told The Edge Financial Daily yesterday.

While MAS’ stock hit the highest price since Feb 25, its trading volume was not as high as in the previous trading sessions these past few weeks. Its recent high of 471.09 million shares traded happened on July 18, after its flight MH17 was shot down over Ukraine.

Commenting on yesterday’s trading volume, Goh said: “It was only the first day of trading since MAS counter’s suspension. There will be continued activities in the coming days.”

In a report yesterday, AmResearch Sdn Bhd said there is a “fair chance” for the privatisation exercise to succeed.

“Firstly, minority shareholding in MAS is well distributed. The largest of the minority shareholders is Permodalan Nasional Bhd with a 1.7% stake, which effectively represents just 0.5% of the minority shareholders concerned in this exercise,” said the research house.

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AmResearch also said Khazanah’s offer price valued MAS shares at 1.6 times of the research house’s forecast price-to-book-value, and more than double of its regional peers on the basis of enterprise value to earnings before interest, taxation, depreciation and amortisation (EV/Ebitda).

“Bear in mind that MAS’ book value will deteriorate further given deeper losses. Moreover, MAS will likely require fresh capital in the next 12 months, given rising cash burn rate and an already stretched net gearing of 305% (FY14F).”

MAS in a statement yesterday said its management had met with the carrier’s representatives of employee unions and other associations as “the first step to inform and engage employees” on its future restructuring process.

“While there are still many details about the future which will be forthcoming, MAS is committed to working closely with all its employees and airline partners throughout this process following the principles of fairness, transparency and compassion,” said the national carrier.

This article first appeared in The Edge Financial Daily, on August 12, 2014.[/size]