Agenda• COMPANY BACKGROUND• CURRENT ISSUES• STATISTICS/CHARTS• CRITICAL ANALYSIS• FUTURE OUTLOOK• SUMMARY
COMPANYBACKGROUND• Founded as Malaysia Airways Ltd. (MAL) in 1947.• Malaysian Airline Systems (MAS) was established in October 1972, servicing 34 domestics routes and six international destinations• By the end of 1987, MAS has spur growth as an international carrier, offering 34 domestic routes and 27 international destinations.
CURRENT ISSUES• Current market position• RM 2.5 billion loss for 2011• Exceed the loss predictions of 15 Bloomberg analyst the 1.21 billion.• Expected further loss for 2012 (strive for breakeven)
Malaysia Airlines5-years Share Price 4.88 3.02 2.77 2.09 1.31
analysisNPVGO = P – EPS / rP (as at 31 December 2007) = RM 3.89Earning Per Share (2007) = RM 58.00r = 6.24NPVGO = P – EPS / R = 3.89 – (58 / 6.24) = - 5.4Based on Year 2007, there is negative growth opportunity.
Turnaround Plan 20111. Joint venture with Air Asia to reduce operational cost2. Revenue/ Yield Improvement (i) Suspending unprofitable routes –Dubai, Cape Town, Johannesburg (ii) Spinning off ancillary businessessuch as cargo and ground cargo (iii) Reduction of headcount
Share Swap Malaysia Airlines Airasia Percent Shares Swapped 20% 10% Share Price at Swap 1.60 3.95 Total Shares Outstanding 3,342.15 mil 2,778.32 mil Market Cap at Swap 5347.44 mil 10974.36 mil Value of Shares Swapped 1069.49 mil 1097.44 milSpeculation:• Positive: MAS needs talent, AA investment growth and leveraging resources.• Negative: Under Government review, Facing Union protests, Khazanah to buyback?
CAPEX• 6 Airbus A380 Super Jumbo purchase• Add MYR 9.5 billion CAPEX expenditure• 2012 – MYR 6 billion• 2013 – MYR 3.5 billion• Speculation:Increasing costs, can MAS sustain this?
SummaryAnalyst Projection• Negative on the stock with more than 60% placing a “sell” call• Reduce the target price on stock to RM1.04• Doubts on the turnaround planSpeculation• Government bailout?• Funding of CAPEX?