NEW ORDERS: Photo shows MAS’ A330 taking off. The group’s capital expenditure will be mainly for the progressive payments for its new aircraft orders for the next two years, namely the 17 units of B738 and five units of A330.
KUCHING: Due to the risk of higher crude oil prices and increasing competition from regional peers and low cost carriers, Malaysia Airlines Systems Bhd (MAS) is not expected to make a major turnaround in financial year 2013 (FY13).
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), while MAS’ operating statistics showed encouraging results in the fourth quarter of 2012 (4Q12), yield improvement would remain a key challenge for MAS amid intensifying competition from its regional peers.
“We have tweaked our FY 13E forecast higher by 18 per cent as we imputed in the possible finance cost savings from the proposed rights issue, and also a new higher load assumption,” it noted.
Additionally, MAS recently released more details on its recent corporate proposals announced to Bursa Malaysia.
“MAS hopes to approve several corporate proposals including a reduction of its par value from RM1 to RM0.10, a reduction of its share premium account and a rights issue with a targeted gross amount to be raised up to RM3.1 billion,” outlined Kenanga Research.
To note, MAS will convene an EGM on March 5, 2013 to seek shareholder’s approval for the corporate proposals. The entire corporate proposal transaction will be completed by 2Q13.
“We are neutral on the announcement as the proposals had already been announced earlier during its previous 3Q12 results in November 2012. However, we take comfort that the announcement stated the scenario for the basis of the rights issue entitlement.”
The big chunk of the proceeds would be utilised for its working capital (43 per cent) followed by capex (32 per cent) and repayment of the existing borrowings (25 per cent). The repayment of the existing borrowings would save up to RM39 million of its financing cost while the capital expenditure would be mainly for the progressive payments for its new aircraft orders for the next two years, namely the 17 units of B738 and five units of A330.