MAS stock falls 16%, analysts
doubt financing capabilities
Presenna Nambiar
PETALING JAYA (Nov 29, 2012):
"We were taken by surprise on the rights issue proposal. It indicates that MAS may have issues securing financing to meet the group's huge near-term capital requirement amounting to RM9 billion," Alliance Research Sdn Bhd said in a report yesterday.
"We believe investors will be jittery of such a large cash call amid continued operating losses.
"While the cash call will help to address the short-term funding requirement and liquidity needs, it does little to address the losses at the operating level."
Malaysia Airlines' (MAS) stock fell more than
16% on news that it is yet again seeking capital injection from major
shareholder, Khazanah Nasional Bhd and cancelling 90 sen of its par value.
The national airline, which was the most
actively traded counter yesterday, saw more than RM560 million of its market
capitalisation wiped out at the end of trading activities.
The stock closed 17 sen down at 84 sen, with
some 77.2 million shares done.
MAS had on Tuesday announced plans to have a
rights issue to raise up to RM3.1 billion for working capital (RM1.3 billion),
capital expenditure (RM987 million) and repay borrowings (RM777 million).
It also plans to shave off its share premium
account in a bid to cut its accumulated losses, buy back 10 Boeing 737-400s
originally on lease for RM64 million to meet network requirements prior to the
delivery of its new 737-800 fleet and to save on high maintenance costs it
would need to incur to deliver the planes back to its lessor in mint condition.
Analysts are
still cautious on the MAS turnaround story, despite it beating the consensus
target on core losses, overshadowed by another rights issue and a reduction in
par value of its shares from RM1 per share to 10 sen a share.
The airline registered a small operating
profit of RM3.9 million on revenue of RM3.3 billion for the third quarter ended
Sept 30 2012 due to lower jet fuel prices and fuel consumption as a result of a
7% year-on-year reduction in capacity available-seat-kilometre (ASK) and better
utilisation of newer and more fuel-efficient aircraft.
"We were taken by
surprise on the rights issue proposal. It indicates that MAS may have issues
securing financing to meet the group's huge near-term capital requirement
amounting to RM9 billion," Alliance Research Sdn Bhd said in a report
yesterday.
"We believe investors will be jittery of
such a large cash call amid continued operating losses.
"While the cash call
will help to address the short-term funding requirement and liquidity needs, it
does little to address the losses at the operating level."
Alliance opined that based on the indicative
issue price of 60 sen as disclosed in the company's announcement, the proposed
rights issue will be at a steep discount to current price, while the dilution
is enormous given its expectation of a 3-for-2 rights issue in order to raise
RM3.1 billion.
The
cash call is the third by MAS since 2007.
MAS
raised RM1.55 billion and RM2.67 billion from its rights issue in 2007 and 2009
respectively, to finance new aircraft and pare down debts.
HwangDBS Vickers Research Sdn Bhd said there
is execution risk in MAS trying to turn around its business, and the aviation
landscape in Malaysia will become more competitive with the emergence of
Malindo Airways next year.
The research firm has trimmed its FY12 core
net loss forecast to RM567 million from RM961 million previously, after raising
MAS' passenger load factor from 70% to 75%.
HwangDBS is expecting MAS to register stronger
performance in the fourth quarter of 2012 due to the year-end holidays.
Kenanga Research said with the new fleet in
operation, MAS will be able to make a meaningful turnaround.
The airline is to receive 12 new 737-800s and
three new A330-300s in 2013. It has already added 14 737-800s, eight A330-300s
and four A380s to its fleet since 2010.
Kenanga is raising its FY12 estimate higher by
30% from a RM764 million net loss and RM1.2 billion revenue previously, with a
new RM482 million core net profit target for FY13 estimate, as it expects MAS
to be able to recover its yield and get a higher load via the new fleet.
"In the near
term, any positive share price movement is likely to be muted due to the
negative sentiment on its proposed capital reduction and rights issue
announcement," it added.
Related article:
Hello MAS TROUBLESHOOTERS...can you please publish this?
ReplyDeleteMASEU protest to the proposed secret ballot exercise and MASEU request that the following action be taken by the Industrial Relations Department:-
a) To permit MAS not to entertain any claim of recognition by NUFAM to representatives cabin crew members on the grounds given above and it is improper for MAS to sign a Voting MOU with NUFAM on 19th December 2012 especially when there is already an existing in-house union i.e. MASEU that governs MAS Cabin Crew’s CA successful for 33 years,
b) To seek the good office of Director General of Trade Union / Minister of Human Resources to direct the NUFAM to amend its constitution to prohibit MAS cabin crew to join NUFAM on the ground that there is IN EXISTENCE an in-house trade union to represent MAS cabin crew, as evident from the Collective Agreements concluded with MAS SINCE 1979 and WHICH had been taken cognizance by the Industrial Court,
c) To advise the Director General of Trade Union to withdraw or cancel the certificate OF registration of NUFAM, under Section 15 (2)(a) of the Trade Unions Act 1959 (Act 262) as MASEU has the largest number of MAS employees as members of MASEU if NUFAM refuses to amend its constitution,
d) To cancel the proposed secret ballot exercise involving MAS Cabin Crew, as by allowing this exercise, would cause a conflict of interests or division of loyalty among MAS Cabin Crew, who are members of MASEU if they are invited to participate in the secret ballot.
e) To advise MAS to revoke the Voting MOU where MAS and NUFAM signed on 19th December 2012 as this contravenes Article 8 of the Collective Agreement (CA) between MAS and MASEU. An extract of Article 8 is reproduced below:-
“Article 8 – UNION RECOGNITION AND SCOPE OF REPRESENTATION
The company recognized the Union as the sole collective negotiating body representing its permanent employees in Peninsular Malaysia referred to in the Employees Classification Table set out in Schedule IV.”
MASEU views this matter seriously as the action of MAS management in signing the Voting MOU is tantamount to inducing MASEU Cabin Crew to refrain or resign to be a member of MASEU and this contravenes Section 5.1. (e) of the Industrial Relations Act 1967 which is reproduced below:-
“SECTION 5 – PROHIBITION ON EMPLOYERS AND THEIR TRADE UNIONS IN RESPECT OF CERTAIN ACTS
5.1. No employer or trade union of employers, and no person acting on behalf of an employer or such trade union shall:-
(e) Induce a person to refrain from becoming or to cease to be a member or officer of a trade union by conferring or offering to confer any advantage on or by procuring or offering to procure any advantage for any person.”
MASEU believe that since the registration of NUFAM was under political pressure, we also believe that the secret ballot exercise is subsequently under political pressure to grant recognition to NUFAM to represent MAS Cabin Crew is an attempt to annihilate sustainability/survival of MASEU. This practice is highly undesirable and bad for fostering good industrial relations.
MASEU object strongly to the stand of the Ministry action and demand the Ministry to act rightly within the legal framework of the Industrial Relations Act 1967 and the Trade Union Act to foster good industrial relations in not only MAS but in the Country.
MASEU further believe if such practice is condoned or continued, it would encourage other categories of MAS graded employees to form another National Union in MAS, which would not be in the interest of MAS and its employees.
MASEU request that DG industrial Relations and DG Trade Union to take immediate action to accede to our request.