MAS, AirAsia to be in focus amid volatile market

KUALA LUMPUR: Malaysian Airline System Bhd (MAS) and AirAsia Bhd will be in focus under a strategic collaboration to be facilitated by Khazanah Nasional Bhd, providing a bright spot amid the turmoil in the equities markets.

The Edge weekly reported that both carriers would leverage on each other’s strengths instead of competing with each other.

Under the corporate exercise, The Edge learnt that Khazanah Nasional Bhd would acquire a substantial stake in Tune Air Sdn Bhd. TuneAir owns 23% of the low-cost carrier.

Tune Air will subscribe for new shares in MAS which are likely to be at a premium to the current market price. MAS closed at RM1.60 last Friday.

The Edge weekly also reported that in the near term, MAS and AirAsia would continue their operations as usual. More importantly, the partnership will significantly change how MAS is run and allowing it to focus on the premium long-haul sector.

Aside from fresh corporate developments, analysts expect volatility in the global markets to continue this week, especially after the battering.

Stock market data showed that RM26.89 billion in market capitalisation was wiped off Bursa Malaysia last Friday.

While there could be some bottom-fishing activities for hammered-down stocks, overall sentiment would be mostly cautious, analysts said. They expect market consolidation to extend into 3Q11.

Six of the component stocks in the FBM KLCI hit a 52-week low last Friday, namely IOI Corp Bhd, YTL Power International Bhd and YTL Corp Bhd, MISC Bhd, Tenaga Nasional Bhd and PPB Group Bhd.

ECM Libra head of research Bernard Ching said the fundamentals of global economy were rather shaky, the weak labour market and consumer spending were rearing the ugly heads again.

Ching said in the medium term emerging markets would remain attractive due to more resilient growth prospects and healthier government fiscal positions.
Global investors will likely rebalance their current portfolio, which comprises mainly cash and low-yielding US treasuries to emerging market equities.

Ching advises investors to avoid stocks which are dependent on exports to the Western economies. Instead, preference is for stocks which derive most of its earnings from domestic consumption and/or investments.

Magna Prima may be among the stocks that hog the limelight.

The property developer is making its foray into Australia to undertake a mixed residential and commercial project in Melbourne with an indicative gross development cost of A$148 million (RM461 million). The company expects to record a profit of A$62 million from the project.

Wing Tai Malaysia expects to record a gain of RM27.63 million from the sale of two pieces of land in Seberang Perai, Penang to Aeon Co Bhd for RM50.12 million cash.

The Edge weekly reported that the River of Life project had seen two developments over the last two weeks, leading to renewed interest in the project and Datuk Lim Kang Hoo’s Ekovest Bhd.

The boards of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd had agreed on their merger to become one of the world’s largest oil and gas service providers in terms of market capitalisation and assets.

They had accepted Integral Key Sdn Bhd’s (IKSB) RM11.85 billion offer to acquire all their assets and liabilities in a share swap. The offer shall remain open for acceptance until 5pm on Aug 15.

Fraser & Neave’s net profit for 3Q11 ended June 30 rose 11.2% to RM77.85 million from RM70 million a year earlier due to strong contribution from its property and soft drinks divisions.

Its revenue for the quarter dipped to RM882.47 million from RM892.77 million mainly due to lower volume of dairy products sold in Malaysia.