'Sell' call on MAS

KUALA LUMPUR: Maybank Investment Bank, which is expecting a deep loss for the first quarter of 2012 for Malaysia Airlines (MAS), is recommending a "sell" for the national carrier's stock in the run-up to the expected announcement of its results next week.

"The first quarter of 2012 is expected to be severely loss-making due to the impact of a 20 per cent higher fuel price year-on-year and a weak yield environment," it said in its research note.

Maybank Investment has also cut its full-year forecast for the airline, predicting that MAS will end the year with about half a billion in net losses for 2012, instead of a break even of RM5 million previously.

This is despite a better showing expected in the second half of the year when it removes most of its old aircraft from the fleet.

"We think MAS is struggling to get its turnaround strategy in place. We have cut our earnings forecast due to higher than budgeted fuel price and a tougher yield environment," the note said.

Maybank Investment said MAS is expected to announce a bridging loan arrangement to the tune of RM1.5 billion and raise perpetual bonds amounting to RM3 billion to address its low cash reserves issue.

Maybank Investment is more positive of MAS' prospects in 2013 though, estimating it to break even, with a completely brand new fleet that will bring down unit cost by a considerable amount.

The research house has also lowered its target price for MAS to RM1.

The stock closed six per cent lower at RM1.05 yesterday.

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