KUCHING: Shares of national carrier Malaysian Airline System Bhd (MAS) rose and was among the top most actively traded stock yesterday following Friday’s suspended trading on privatisation news.
At closing, the shares rose two sen or 8.3 per cent to close at 26 sen per share. About 2.39.42 million shares were traded yesterday.
On Friday, major shareholder Khazanah Nasional Bhd (Khazanah) announced to Bursa Malaysia its plans to take MAS private at an offer price of 27 sen per share, which will result in Khazanah being the sole ordinary shareholder of MAS.
Focus is now on investors as to whether they will chose to accept the offer.
“In essence, investors face the decision whether to take back some of what has been sunk into MAS, which admittedly is quite painful, or otherwise, commit more and risk losing some or all of that too, which can be equally or even more painful judging by the absence of success in the countless restructuring plans (and cash calls) at MAS over the past decade,” said AmResearch Sdn Bhd yesterday on the matter.
“The RM1.4 billion being paid out in this exercise is a 40 per cent premium to the roughly RM900 million (minorities’ portion) raised from the last rights issue, which means investors are getting back that amount, and a little bit more. As the proposed privatisation matches our existing fair value of RM0.27 per share share, and we think the offer values MAS decently, we recommend investors to accept the proposal.”
The team behind MIDF Amanah Investment Bank Bhd (MIDF Research) similarly advised investors to accept the offer based on two investment intuitions.
“First, investors can walk away with the RM0.27 offer consideration without having to fork out additional capital in the future to restructure MAS, which success is not guaranteed based on previous failed attempts,” it explained. “Note that MAS has been struggling to turnaround since 2011 and losses are expected to balloon to RM1.1 billion this year.
“Also, right on the heels of MH370 and MH17 incidents, we believe the company is in dire need of fresh funds from the capital market again to restructure the company.
“As such, we view this offer as an opportunity to exit the company without risking investor’s capital further to revive the company. Note that the previous fund raising exercise, which involved rights issues of share for a total consideration of RM3.07 blion, was completed not long ago in May-2013.
“As we view this exercise as an indirect offer from Khazanah, it is generous of Khazanah to offer a premium for “non-controlling” stake, since Khazanah has already owned 69 per cent of MAS. Moreover, the premium to privatise an ailing company, which has been losing market share, is just hard to justify.”