M&A: MAS' RM1b provisions will be possible writebacks

KUALA LUMPUR: M&A Securities Bhd has opined that Malaysia Airlines' more than RM1 billion provisions will become possible writebacks for the airline in the coming quarters.

MAS recorded RM2.5 billion in net loss for financial year 2011, a record high in the airline's history.

This includes one-off provisions for impairment and obsolescence of engineering spare parts of RM179 million, provision of aircraft redelivery cost of RM602 million, impairment of aircraft of RM314 million and loss on derivatives of RM69 million. The airline's core net loss stood at RM1.34 billion.

"All these provisions point to a management strategic decision to make a one-off provision and making writebacks in the coming quarters to cushion the operational losses," M&A Securities analyst Ahmad Morat said in a research note.

Operating expenditure grew by 21 per cent year-on-year, due to higher fuel cost.

Revenue from airlines operation grew by 7 per cent to RM3.45 billion amid reduced seat factor to 72 per cent. However, revenue from cargo services fell by 15 per cent to RM523 million.

M&A Securities has downgraded MAS to "sell" from a "hold" call, with a revised fair value of RM1.15 from RM1.45 previously, as it does not see a quick operational turnaround