Hot Stocks Aviation shares rise on Khazanah's restructuring plan for MAS

by **Cals** Tue 02 Sep 2014, 20:44

Hot Stocks Aviation shares rise on Khazanah's restructuring plan for MAS

Business & Markets 2014

Written by Jonathan Gan of theedgemalaysia.com

Tuesday, 02 September 2014 11:03

KUALA LUMPUR (Sept 2): Malaysian aviation stocks rose on Khazanah Nasional Bhd's restructuring plan for Malaysian Airline System Bhd (MAS).

Government investment arm Khazanah, which owns 69.37% in MAS, will set up a new company (newco) to undertake MAS' operations and reduced workforce.

At 10:20 am, MAS shares rose 0.5 sen or 2% to 25.5 sen with some 18.6 million shares traded.

AirAsia Bhd climbed one sen or 0.41% to RM2.42 sen while Malaysia Airports Holdings Bhd rose one sen or 0.13% to RM7.71 per share.

A TA Securities Holdings Bhd note today indicated that the development in MAS would be positive for the industry as it would rationalise airfares.

TA analyst Tan Kam Meng said: “We believe the RM6 billion lifeline will be able to revive the business as a going concern, if all the measures stipulated in the plan can be successfully implemented.

“AirAsia and Malindo could also benefit from the plan as we believe MAS, as a full-service airline, will re-focus on the premium segment and target business travelers and frequent flyers as far as market segmentation is concerned. Airfares will be priced rationally based on cost structures and services rendered to avoid unfair competition,” Tan said.

Tan has upgraded his rating on the domestic aviation sector to “neutral” from “underweight”.

Meanwhile, in-flight caterer Brahim Holdings Bhd shares fell five sen or 3.76% to RM1.28.

An analyst with Hong Leong Investment Bank attributed the fall in Brahim shares to weak sentiment.

“A complete cut to Brahim’s contract with MAS could only save less than 2% of its total operating costs,” she said.

Last Friday, Khazanah said it would pump in fresh capital of RM3 billion into the NewCo to revive MAS. This is in addition to an estimated RM1.6 billion for the migration of operations and workforce to the NewCo, and RM1.38 billion privatisation cost.

According to Khazanah Managing Director Tan Sri Azman Mokhtar, the Cabinet has approved the latest plan to revamp the national carrier. The plan includes a 30% cut of MAS' workforce, and cutting unprofitable routes.

Khazanah said if the restructuring exercise was implemented according to plan, it expected MAS to be profitable in three years. Khazanah indicated that MAS would be relisted in three to five years after the airline turned profitable.