Analysts optimistic over MAS-AirAsia MOU

by **hlk** Thu 03 May 2012, 19:02

Analysts are optimist that the Memoranda of Understanding (MoU) between Malaysia Airlines (MAS) and AirAsia will benefit both and the country as well.

It was announced on yesterday that the share swap deal between MAS and AirAsia has been called off.

Instead, MAS and AirAsia inked the two MoUs for joint maintenance services and the establishment of a special purpose vehicle (SPV) to extract procurement synergies such as fuel oil, aircraft components and parts.

MIDF Research said the MoU for the setting up of a joint venture, will be more definitive in nature, as opposed to a framework previously.

"Both airlines can now cooperate to make Malaysia a regional aircraft servicing hub to rival Singapore's maintenance, repair and overhaul facility," it said in its research note today.

In the short term, MIDF Research expects the unwinding of the share swap to have a negative market perception for both airlines to resolve, as internal pressure appears to have overwhelmed management decisions.

The research house is still maintaining its "sell" recommendation for MAS with a target price of RM3.15.

HwangDBS Vickers Research, meanwhile, said with the share swap reversal, the collaboration would not be as strong as initially structured.

"However, both airlines could benefit, from areas under the MoU.
"In particular, the joint procurement of fuel oil can see cost savings, given the sizeable combined requirements of the two groups," it added.

HwangDBS maintained its fully valued call on MAS and AirAsia with target prices of RM1.10 and RM3.10, respectively.

AirAsia and Malaysian Airline System , the nation’s two biggest carriers, surged in Kuala Lumpur trading after saying they will boost collaboration in areas including procurement, even as they end an equity tie-up.

AirAsia, the region’s biggest discount carrier, jumped as much as 9.6 per cent, the biggest intraday rise since September and largest gainer on the benchmark FTSE Bursa Malaysia KLCI Index today.

It pared gains to 6.9 per cent at RM3.56 as of 10.48 am Malaysian Air climbed as much as 9.8 percent, the most in about four months. -- Bernama/Bloomberg