MAS to add RM1b in profits in 2 years

Posted on 30 November 2012 - 05:37am

Presenna Nambiar
sunbiz@thesundaily.com
 

KUALA LUMPUR (Nov 30, 2012): Malaysia Airlines (MAS) aims to generate an additional RM1 billion in profits in two years, by re-negotiating its engineering supply and catering contracts, having a more fuel-efficient fleet, higher aircraft utilisation and turnaround time, said its CEO Ahmad Jauhari Yahya.
This would be met with just a 2 sen margin between revenue and costs. Its target is to bring revenue up to 22 sen, and costs down to 20 sen respectively.
MAS' revenue per available seat kilometre (RASK), a way airlines break down the measurement of revenue, currently stands at 20 sen, while its cost per available seat kilometer (CASK) -- how it breaks down costs -- is at 24.9 sen.
In comparison, a highly profitable airline like Singapore Airlines has a RASK of 27 sen.
"It sounds simple enough but a lot of work needs to be done," he told reporters after a luncheon with local fund managers organised by Maybank Investment Bank here yesterday.
Ahmad Jauhari insists that this time around changes made are structural changes, which will lead to sustainable operations of the national airline in the future.
Its revenue management team, for example, which now has a new head under Ahmad Jauhari's management, has become more sensitive to changes of ticket prices in the market. It is now mandated to react to market fares within six hours.
MAS is also in the midst of re-negotiating its large engineering supply and catering contracts, which make up RM1 billion and RM200 million costs per year, respectively.
 

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MAS falls on delayed aircraft delivery

KUALA LUMPUR: Malaysia Airlines System Bhd's (MAS) share
prices dropped 18.8 per cent or 19 sen to 81.5 sen as at 10.05 am after economists anticipated negative impacts from the delayed re-delivery of 10 ageing Boeing 737-400 aircraft.

MIDF Research said MAS originally entered into an Aircraft Sale Agreement with Bank of Utah to buy back 10 existing Boeing 737-400 aircraft at US$6.4 million (RM19.5 million) per plane to avoid the impairment charge incurred in the re-delivery conditions imposed during the lease tenure.

"But now the ageing 10 aircraft will be utilised until the end of 2014 and this will not reduce the average fleet to 7.7 years from 12.2 years as planned before," it said in a research note today.

MIDF Research said in order to strengthen its balance sheet, the national carrier has unveiled a new fourth pillar of financing comprising share price par value reduction to RM0.10 from RM1 and new rights issues with gross proceeds of RM3.1 billion.

It said the cancellation of the RM0.90 par value will give a credit of RM3 billion to partially offset the accumulated losses in the balance sheet.

The rights issuance, targeted for completion in the second quarter of financial year 2013, will be utilised to pare down debt by RM777 million with the remainder for capital expenditure and working capital requirements.


Read more: MAS falls on delayed aircraft delivery http://www.btimes.com.my/Current_News/BTIMES/articles/20121128111635/Article/index_html#ixzz2DX571RBw

Re-rating in the works for MAS?

MALAYSIA Airlines (MAS) is still in the red and has been for the last six consecutive quarters.

But this time the losses were smaller compared with the corresponding quarter a year ago.

On Tuesday, MAS reported RM349mil net loss for the April-June 2012 period versus RM526mil net loss a year ago.

However, after stripping out the forex translation gains of RM173mil and derivative fair value adjustment of RM15.3mil, the airline's core net loss for the second quarter was only RM160.4mil.

Operationally, the loss also narrowed to RM101mil from RM443mil. Moving forward, the second half is generally a stronger period for airlines globally.

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Maybank IB raises MAS earnings forecast

Maybank IB Research has raised the financial year 2013-14 earnings forecast of Malaysia Airlines (MAS) by 5.5 per cent and 1.4 per cent respectively.
It took into account the management's latest capacity growth guidance and better fuel consumption rates due to a younger aircraft fleet.

"The earnings forecast is premised on a fuel price assumption of US$125 per barrel, which will be adjusted as required," it said in a research note today.

The research house is also positive on prospects of the national airline breaking even in the second half of the financial year 2012.

Read more: Maybank IB raises MAS earnings forecast

MAS-reviews-vendor-contracts-to-slash-costs

http://www.theedgemalaysia.com/business-news/214704-mas-reviews-vendor-contracts-to-slash-costs.html

" A top MAS official said apart from letting the contract with PlaneConsult lapse, its priority now is to re-negotiate the existing major contracts as part of its strategy to reduce costs by 10% or by between RM300 million and RM500 million this year."

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/0C98D971C7F301B54825794400009AF5?OpenDocument

MAS only to pay caterer what it takes for in-flight services

PETALING JAYA: Malaysia Airlines (MAS) is said to have re-negotiated its catering contract after nine years where it will no longer pay a guaranteed monthly amount for catering services and only for what it takes from LSG Sky Chefs-Brahim's Sdn Bhd (LSGB) for its in-flight catering services.

It is learnt that renegotiations have been concluded recently by the new team at MAS and will help MAS to restructure its cost base.

The amount MAS used to pay as the guaranteed figure under the catering contract is not known, but the contract between LSGB and MAS has long come under fire for the exclusivity as well as the long-term nature of the deal.

LSGB, an inflight catering service provider, had in 2003 signed an agreement with MAS for the exclusive right to supply and provide inflight catering and cabin handling services to MAS at both the Penang airport and the KL International Airport in Sepang for 25 years.

“It is a significant development for the airline as it no longer needs to pay for catering services based on the minimum baseline revenue (MBR) a term used in the catering business and that burden is now removed.

“With good inventory planning it will only uplift what it needs and this whole exercise helps it cut wastage and hopefully it translates in reduced cost for the airline,'' said a source.

Another source said the contract was initially crafted to “include a guarantee amount because there was a need for certainty, and also for sustainability and profitability.”

During Brahim's Holdings Bhd's AGM recently, company officials side-stepped questions when asked if there was a renegotiation over the catering contract.

The official then said: “Just wait for the announcement, we are always open to working together with MAS and I can't say more. ”

The MBR removal will have an impact on LSGB's bottomline but the quantum is not known. As for Brahim's, the MAS contract accounts for about 80% of revenue. For 2011, Brahim's earned RM336mil in revenue, RM314mil in 2010 and RM294mil in 2009.

The company is also diversifying to boost its revenues by 2015 by banking on its new venture into sugar refining.

The renegotiation of contracts is part of the recovery plan as outlined in MAS December 2011 business plan.

In the plan, MAS said it was “acting on two key levers to reduce costs. First, we will renegotiate our procurement costs in catering, ground handling and maintenance ...”

MAS needs to bring down its cost as it is spending more than what it earns and the airline's revenue per seat km is 20 sen while its cost per seat km is 26 sen.

How much savings MAS will receive from renegotiating its catering contract is not known, but in its business plan MAS did say that “our base case target is for the core business (passenger airline without cargo, catering and other ancillary businesses) to generate a significantly reduced loss of approximately RM340mil in 2012.”

Besides the catering contract renegotiation, MAS has also made significant improvements on its customer service front and once it takes delivery of its flagship A380 aircraft, there will be a host of new initiativ es in a bid to push for higher sales, sources said.

MAS is expected to release its financial results for the first three months ended March 31, 2012 soon and analysts are expecting another quarter of losses to the tune to RM330mil.

The airline in 2011 reported a net loss of RM2.5bil and analysts expect MAS to only return to the black in 2013.

http://biz.thestar.com.my/news/story.asp?file=/2012/5/22/business/20120522082158&sec=business

Tuesday, 22 May 2012 1st Q
6:04PM KHAZANAH NASIONAL BERHAD (200,519,020 Shares Transacted)
5:27PM 1Q net loss 171.793 million (decreased 29.11%)

2x Aug 2012 2nd Q
2x Nov 2012 3rd Q
2x Feb 2013 4th Q

'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.

Read more 'Sell' call on MAS

MAS takes delivery of 1st A380 in June

PETALING JAYA (March 9, 2012): Malaysia Airlines (MAS) will take delivery of the first of six Airbus A380 superjumbo jets on June 19, nine years after placing the order, and will start thrice weekly operations from Kuala Lumpur to London on July 1.

The aircraft is currently undergoing the finishing touches in Hamburg, Germany, said MAS acting head of strategic communications, Nor Zalida Ahmad.

"Starting from July 1, MAS will operate three flights a week on the Kuala Lumpur-London route, and then increase the frequency to daily from Aug 25 with the delivery of its second A380. The third and fourth A380s (which MAS will take possession in August and September, respectively) will be used to fly between Kuala Lumpur and Sydney," MAS head of customer experience, Datuk Salleh Ahmad Tabrani, told a media briefing here yesterday.

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MAS to launch premium unit in ‘near term recovery plan’

Loss-making Malaysian Airline System Bhd (MAS) will launch a new regional premium airline, cut unviable routes and shed noncore businesses in its so-called "near term recovery plan" unveiled yesterday in a bid to return to profitability by 2013.

The new full-service airline will connect Malaysia to key destinations in the country and Asean, as well as South Asia and Greater China, using a fleet of Boeing 737-800, said MAS in a media statement yesterday. The-yet-to be named premium airline will fly all MAS’ domestic and regional routes in the long term.

The segmentation of management will allow the airline to focus on the unique needs of regional premium travellers, said MAS group chief executive officer (CEO) Ahmad Jauhari Yahya in Kuala Lumpur yesterday.

“Our domestic and regional routes are still our most profitable, in spite of intense competition from AirAsia Bhd,” he said.

The premier market of customers who prefer to fly full-service airlines will stay and is expected to grow, he said.

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It’s a tough pull for MAS

MALAYSIA Airlines (MAS) is perhaps the only Malaysian company that has undertaken the most number of restructuring exercises over the past decade to try to get back on its feet.

A decade ago its books were severely tainted with red ink and had to be cleaned up via the Widespread Asset Unbundling (WAU) exercise where it became an asset light airline. But 10 years later it is still in dire straits and appears not too far from where it was a decade ago.

This Wednesday the new boss of MAS, Ahmad Jauhari Yahya, after coming in one-and-a-half hours late for the media briefing, threw in yet another plan to put it back on course. The theme is “right sizing'' and it involves cost cuts to spinning-off businesses.

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Source of photo

NB: Monitor for sign of successful turnaround!!

CIMB Bank to issue 50m CWs each on JCY, MAS, Supermax, MPHB

KUALA LUMPUR: CIMB Bank Bhd has issued 50 million European-style call warrants (CWs) each over the shares of JCY International Bhd, MALAYSIAN AIRLINE SYSTEM BHD [] (MAS), Supermax Corp Bhd and MULTI-PURPOSE HOLDINGS BHD [] (MPHB).

According to several announcements made by CIMB Bank Bhd on Monday, the tentative listing date is Tuesday, March 9 and the expiry date is March 10, 2011.

The exercise ratio is two JCY CWs for every one shares while the exercise price is RM1.35, which is 92.47% of the closing price of the shares on the price-fixing date on Feb 25 of RM1.46. The issue price for the JCY-CW is 15 sen.

As for the MAS-CW, the exercise ratio is two CWs to one MAS share and the exercise price is RM2, being 96.15% of the closing price on the price-fixing date of Feb 25 of RM2.08. The issue price for the MAS-CW is 18 sen.

On the Supermax-CW, the exercise ratio is eight CWs to one Supermax share and the exercise price is RM5.60, which is 95.08% of the closing price on Feb 25. The issue price for the Supermax-CW is 17.5 sen.

It said the MPHB-CW's exercise ratio is two CWs to one share and the exercise price is RM1.80, which is 93.26% of the closing price on Feb 25. The issue price is 17.5 sen.

Folliwing the issuance of the four CWs, the number of CWs issued by CIMB Bank is 79.

Buyouts bubbling, focus on tech stocks, glovemakers

Investors may look for more privatisation targets this week, semiconductor stocks could extend gains, while shares of rubber glove makers may continue sliding as investors temper optimism over their prospects.

Last week, Hume Industries (Malaysia) Bhd (3328), a maker of concrete products, and MBF Holdings Bhd, a trader and credit card issuer, received buyout offers from their owners.

On January 14, Tan Sri Quek Leng Chan made an offer to buy the rest of Hume for RM4.30 a share, a 7.5 per cent premium over the price before the offer was made.

This bolstered Hume shares as they crept up 2.4 per cent to RM4.25 the next day.

On January 11, Tan Sri Dr Ninian Mogan Lourdenadin offered 65 sen apiece to buy the rest of MBF Holdings. The stock closed 0.8 per cent up at 62 sen on Friday.

However, dealers said both offers may draw resistance from minority shareholders.

"The offers appear to be a bit low. They may have to revise if the take-up is not good," said a dealer, who declined to be named.

At RM4.30, Quek's offer for Hume is below the group's net assets per share of RM5.04 as at September 30 2009.

MBF's net assets per share, 95 sen at end-September 2009, is also higher than the offer price of 65 sen.

Semiconductor stocks may continue their rise this week as investors bet that they may benefit from recovering global demand for computers, mobile phones and liquid crystal display televisions.

Intel, the world's biggest chipmaker, forecast higher first quarter revenue than analysts estimated as demand for notebook computers rebounded. Its fourth quarter net income increased more than ninefold to US$2.28 billion (RM7.6 billion), the company said in a statement.

RHB Research expects a stronger recovery for the semiconductor sector this year, backed by a stronger outlook for key product segments, it said in a report on Friday.

Chipmaker Malaysian Pacific Industries Bhd gained 7 per cent on Friday, extending a 40 per cent rise for the year so far. Unisem Bhd also rose, adding 6 per cent to close at RM2.49 on Friday.

Stocks of rubber glove makers may be in for a bumpy ride this week after their recent surges led to concern that they were getting expensive.

They tumbled on Friday, giving up some of their gains after a sizzling run as analysts think the stocks are still cheap relative to their future earnings.

Industry leader Top Glove Corp Bhd fell 3.1 per cent to close at RM11.38 on Friday, while second-ranked Supermax Corp Bhd shed 8 per cent to end at RM5.56.

Investors may also focus on Malaysia Airlines (MAS) this week as its engineering unit is set to announce a deal to do maintenance work for India's SpiceJet.

MAS did not provide details, but a signing ceremony is due to be held today. MAS shares closed at RM2.96 on Friday.

Shares of builder IJM Corp Bhd may continue benefiting from an upgrade by UBS last week.

The research house now rates the stock a "buy" from "neutral" before.

IJM gained 2 per cent to close at RM4.70 on Friday.