MIDF Reseach downgrades MAS to "Sell", target price 27 sen
Friday June 7, 2013 MYT 2:45:01 PM
KUALA LUMPUR: MIDF Research has downgraded Malaysian Airline System Bhd (MAS) to “Sell” from “Neutral” and reduced its target price to 27 sen from 34 sen due to its weak prospects.
“Due to the worsening market yields and sticky high operating expenses, we opine that it is improbable for MAS to be able to turn around its business by financial year 2013-2014 as we had earlier expected,” it said on Friday.
It also revised its financial year 2013 and 2014 forecast to a net loss of RM762.5mil and RM187.5 4 respectively and expects the turnaround to happen only in 2015.
MIDF said international “headwinds” will continue to weigh down MAS business turnaround plan despite its recent membership into the Oneworld alliance and ongoing fleet renewal plan.
“In the domestic market, MAS also faces intensifying competitions from accelerated capacity expansion by AirAsia and the launch of Malindo Air,” it said.
It noted MAS regional full service carriers are pursuing the strategy of sacrificing yield in return for a higher load factor.
“Thus under immense international competitions and yield pressure, MAS fare yield dropped by 4.7% on-year to 24.2 sen in 1Q13 despite a leap in passenger load factor by 3.6% points to 76.6%,” it said.
MIDF added MAS have already replaced its entire fleet of B747 and a large portion of its B737-400 with the newly acquired A380 and B737-800 models respectively.
“Nonetheless, there is still a fleet of 17 near aging B777-200ER with an average age of 13.6 years. The management is considering either Airbus A350 or Boeing B787 Dreamliners to replace these long-haul aircrafts,” it said.