HLIB raises its target price for MAS

HLIB Research has raised its target price for Malaysian Airline System Bhd (MAS) to RM1.65 on better optimism of its new management.

"However, as the share price has run ahead of our target price; downgrade to sell," said the research unit of Hong Leong Investment Bank.

Meanwhile in its Investment Research Daily today, OSK Research maintained its trading buy call on MAS with its fair value unchanged at RM2.45.

It said the carrier intended to refocus on the premium market on the belief that this strategy would bring about yield upside on route rationalisation and replacement of older aircraft.

"However, enhancing yield would be a challenge in view of external forces such as competition, overall consumer demographics and the aviation landscape.

"If the collaboration (with AirAsia) succeeds, our sensitivity analysis suggests that a one US cent increase in yields will boost revenue and earnings by RM418 million and RM29.3 million for the 2012 financial year respectively," it said.

HLIB said it was more positive with MAS but remained concern on the airline's capability to compete with renowned regional full service carriers such as Singapore Airlines, Cathay Pacific and Emirates Airways.

"Unlike Singapore and Hong Kong, Malaysia is not a natural high yield market for MAS. Furthermore, we view that the regional premium market is already in maturity stage.

"The execution of new business model as well as the end result remained as huge risks given MAS 'ill-fated' history," it added. -- Bernama