MAS reports Q3 net loss of RM484m

[BC Tam 2]

Also, some interesting disclosures on the QPR sponsorship and the D7 agreement.

I am probably not reading it right, but why is the QPR sponsorship deal (3.9M) and D7 pax re-accomodation (11.7M) appearing in same column ?

Does this mean either

1) MH is paying the sponsorship and paying D7 to fly D7's abandoned pax (hard to believe eh ?)

or

2) MH is being paid for sponsorship (doesn't make sense) and getting paid to fly D7's pax

Bean counters please help !

[Lock SH 0]

I don't know about that but D7 only paid less than RM1 million whereas MAS paid almost RM4 million for QPR sponsorship - read that in D7 prospectus.

 

[KK Lee 5]

Actually I believe the title of the headline is extremely misleading.

 

MAS actually MADE money the last quarter, RM37.5 million to be exact.

 

The RM484 million figure is the total loss for the year. The number was worse after Q2 (RM484+37.5 = RM521.5 million).

 

So it is actually improving its financials. The new round of "attacks" is unwarranted, in my opinion. Regarding all that par value junk, I still have a lot more to learn

 

 

In 2012/3Q; RM37.5 million 'profit' was contributed by RM93.8 million 'unrealized foreign exchange gain'. If MH board and management are confident that MH has turned for the better, RM3,100 million rights issue would be unnecessary.

 

'Unwarranted attacks' for throwing good RM3,100 million after bad?

 

 

I am probably not reading it right, but why is the QPR sponsorship deal (3.9M) and D7 pax re-accomodation (11.7M) appearing in same column ?

Does this mean either

1) MH is paying the sponsorship and paying D7 to fly D7's abandoned pax (hard to believe eh ?)

or

2) MH is being paid for sponsorship (doesn't make sense) and getting paid to fly D7's pax

Bean counters please help !

 

 

One possible explanation;

Those D7 abandoned pax became MH customers, paid to MH, issued with MH tickets and the RM11.7 million was commission paid to D7.

[tktoh 0]

The sponsorship for QPR & passenger re-accomodation agreement was disclosed in the related party transaction

 

- sponsorship of QPR worth RM3.936m we can safely assume it to be MH paying it to QPR

 

- agreement with D7 worth RM11.71m can be payments going both ways as related party transaction is listed as total sum value of transaction between both sides. This amount could include both D7 pay to MH and MH pay to D7 for such services during the period Tony was MH director.

[jani 0]

In 2012/3Q; RM37.5 million 'profit' was contributed by RM93.8 million 'unrealized foreign exchange gain'. If MH board and management are confident that MH has turned for the better, RM3,100 million rights issue would be unnecessary.

 

'Unwarranted attacks' for throwing good RM3,100 million after bad?

 

 

I used the word "unwarranted" carefully, as I also said "new round of attacks".

 

Obviously MAS is NOT doing well, but because of the headline, people were all assuming MAS lost ANOTHER RM484m.

[Fairul 0]

90% par value reduction is exercised when a company is effectively bankrupted and resurrected by new shareholder.

 

With RM3,100 million (about US$1,000 million), one can start up a new airline with 30 A320 or 738, with US$300+ million left over for working capital and have a better chance of success than MH.

 

Can anyone explain more about the par value reduction..and how does it work...im totally lost here..many thanks!!

 

[jani 0]

The par value matter, from what I understand, is just an accounting measure. Par value has no significance to actual share price.

 

It's the rights issue that people are worried about, because it will dilute the value of the stock.

 

In simple terms, it's like last time 10 people were sharing RM10, each person gets RM1.

 

But now 20 people are still sharing RM10, so now each person only gets RM0.50.

 

Forgive me if what I'm saying is wrong

Edited November 29, 2012 by jani

[flee 5]

 

RM3bil rights issue a dampener on MAS?

By B.K. SIDHU

 

PETALING JAYA: A day after Malaysia Airlines (MAS) announced a small profit of RM37mil and plans to raise RM3bil via a rights issue for its expansion, its share price tanked by nearly 20% because of fears of share dilution.

 

Another fund-raising exercise is not what MAS shareholders are hoping for, but MAS group chief executive officer Ahmad Jauhari Yahya said “the rights issue was important for MAS.''

 

“We basically need to ensure the money is there for us to expand productively,'' he told StarBiz yesterday.

 

In yesterday's trading MAS shares were most actively traded and the stock sank 20% in early trade before closing the day 17% lower by shedding 17 sen to 84 sen.

 

“We know the reaction in the market. It is because of the proposed capital restructuring as` they see the rights can be dilutive (if a shareholder does) not subscribe to the rights.''

 

“But we will price the rights attractively for them to participate in the growth of MAS. We are confident that we are on the right track and have gained traction. We want to maintain the momentum going forward. It is just about getting the capital to pursue the goals of the company,'' Jauhari said.

 

On Tuesday, MAS said it made a modest RM37mil profit for the July-September quarter after taking drastic cuts to reduce cost and axing unprofitable routes. It also said it would raise RM3bil via a rights issue and undertake a capital restructuring to reduce its par value of each MAS share of RM1 to 10 sen to facilitate the rights issue.

 

The reduction of 90 sen in par value gives rise to a credit reserve of up to RM8bil, which it will use to reduce its accumulated losses of RM8.19bil as at end-September.

 

“The capital restructuring is just an accounting issue, not a cash issue. We are trying to balance the accumulated losses,'' Jauhari said.

 

A Hong Leong Investment Bank analyst shares the view.

 

“No impact to overall balance sheet as the decrease in share capital and share premium will be offset by a reduction in retained losses of the same amount. The rights is to re-capitalise shareholder's equity, potentially to pare down existing debts and fund future capex. Based on the rights issue of 3 to 2, the rights is likely to be priced at 60 sen per share,'' he wrote, and expected the entire exercise to be completed by April 2013.

 

Still, some felt MAS should have waited and not rushed to announce the rights and capital restructuring until it had more profit to show.

 

“The share price sank because it is a big challenge to raise RM3bil. Perhaps they should not have touched the par value in the first place until the company is ready to declare dividends, as that is when they need to clean up the past losses first,'' said someone from the industry. Another added that “they should just have taken MAS private, fix it and re-list it later.''

 

To Jauhari, the timing was right.

 

“We felt (it is the right) time because the capital reduction will take time. It is about cleaning the balance sheet and the rights is obviously to support the new growth. We have to put a balance to survive in a competitive environment (or else we would be like the) previous MAS that was constrained in many ways,'' he added.

 

Kenanga Research said the corporate exercises would enhance MAS' balance sheet and allow it a new head start along with its new fleet. Based on its Sept 30 numbers, the corporate exercise was expected to reduce its net gearing from 1.5x to 1.2x, Kenanga said.

 

The rights issue is the fourth pillar of the airline's financing plan which was announced in mid-year as MAS needs RM9bil in capital expenditure to fund aircraft purchase and working capital.

 

The other pillars are the RM2.5bil perpetual sukuk, RM5.3bil bond by SPV-Turus Pesawat Sdn Bhd and other short-term financing. MAS has RM1.4bil in cash as at end-September.

 

Jauhari added that “while the rights are important ... we have to ensure we get the return on capital invested as well.''

 

Source: http://biz.thestar.c...84&sec=business

[flee 5]

'Delisting MAS a wiser option'

By BILQIS BAHARI

 

REBUILDING EFFORT: Analysts tell Khazanah that it is better than bankrolling RM3.1 billion cash call

 

KHAZANAH Nasional Bhd should take Malaysia Airline System Bhd (MAS) private instead of opting to help bankroll a RM3.1 billion cash call, analysts say.

 

News that the national carrier plans a rights issue, its second in as many years, saw investors selling the stock yesterday.

 

In 2009, MAS did a one-for-one rights issue of 1.67 billion shares at RM1.60 each to help fund its acquisition of wide-body aircraft, as well as for working capital (including pre-delivery payments for new aircraft ordered) and repayment of bank borrowings.

 

Investors shunned the latest rights issue plan by selling MAS shares in droves. The stock slumped 17 sen to close at 84 sen on Bursa Malaysia yesterday. It had hit an intraday low of 80 sen a share as sellers swamped buyers.

 

As a result of the selling pressure, MAS' market capitalisation slumped by as much as RM600 million to close the trading day at RM2.8 billion. A day earlier, the airline had a market capitalisation of RM3.4 billion.

 

RHB Capital Bhd said in a research note that the corporate exercise is a step in the right direction for MAS but the market is not in the mood for a massive cash call.

 

"We remain cautious on MAS given the extent of its structural and operational problems that are not adequately addressed ... with a turnaround plan that we find shallow," the research firm said.

 

Script exercises such as a rights issue are normally seen as a negative signal to the stock market as it involves shareholders forking out more money to subscribe for the issue.

 

Shareholders who do not participate in the cash call will see their holding diluted, hence there is a tendency for early cash out of shares by those who do not intend to participate.

 

An analyst from Maybank Investment Bank Bhd opines that the vendors of MAS should opt to take the airline private, restructure the balance sheet, and then list some of its subsidiaries with potential such as Firefly Sdn Bhd and MASkargo Sdn Bhd.

 

"I think that is a fantastic idea if Khazanah were to privatise MAS... They should have done this years ago. But somehow they are looking at all the options except privatisation," he told Business Times.

 

The call for MAS to be taken private does hold water as at current prices, it will only cost Khazanah some RM2.8 billion to delist MAS against RM3.1 billion it will have to fork out if no other shareholder were to subscribe for the rights issue.

 

Analysts argue that MAS could raise as much as RM1.5 billion if it were to list Firefly, considering that its turboprop operation generates a profit of more than RM100 million on a yearly basis.

 

On Tuesday, MAS announced that it plans to undertake a RM3.1 billion cash call and a RM8 billion capital reduction exercise to help clean its balance sheet and wipe off its accumulated losses.

 

Major shareholder Khazanah has given MAS its irrevocable and unconditional undertaking to subscribe for its full entitlement under the proposed rights issue.

 

MAS has said that proceeds from the proposed rights issue are to finance capital expenditure and working capital requirements and to reduce borrowings.

 

 

Source: http://www.btimes.co...icle/index_html

[KK Lee 5]

Can anyone explain more about the par value reduction..and how does it work...im totally lost here..many thanks!!

 

Your $1 worth is now $0.10

 

I used the word "unwarranted" carefully, as I also said "new round of attacks".

 

Obviously MAS is NOT doing well, but because of the headline, people were all assuming MAS lost ANOTHER RM484m.

 

The real issue with MH is hardly anything is done to change for the better.

 

The par value matter, from what I understand, is just an accounting measure. Par value has no significance to actual share price.

 

It's the rights issue that people are worried about, because it will dilute the value of the stock.

 

 

Over 80% of MH stock is hold be the gomen, hence, whatever is free float can hardly make a dent on the stock price.

Edited November 29, 2012 by KK Lee

[BC Tam 2]

One possible explanation;

Those D7 abandoned pax became MH customers, paid to MH, issued with MH tickets and the RM11.7 million was commission paid to D7.

I thought it was D7 that did all the rebooking unto MH flights ?

Did not come across any story about pax having to pay MH - imagine what a stink that would have brought about !

Anyone here was reaccomodated by D7 in that episode ? Care to share your experience ?

 

The sponsorship for QPR & passenger re-accomodation agreement was disclosed in the related party transaction

 

- sponsorship of QPR worth RM3.936m we can safely assume it to be MH paying it to QPR

 

- agreement with D7 worth RM11.71m can be payments going both ways as related party transaction is listed as total sum value of transaction between both sides. This amount could include both D7 pay to MH and MH pay to D7 for such services during the period Tony was MH director.

Thanks

Since both QPR and D7 figures are not quoted in parentheses, we can perhaps also safely assume that MH ended up paying D7 11.7M nett for helping out those abandoned pax - must have involved some fantastic negotiating skills to wring out that deal

[alberttky 0]

How MAS aims to become profitable

 

 

KUALA LUMPUR: Malaysia Airlines is targeting a 10% rise in revenue per available seat kilometer (RASK) or a two sen increase from now until 2014 that would translate in a profit margin of RM1bil, said its group chief executive officer Ahmad Jauhari Yahya.

 

It also plans to reduce its cost per available seat kilometer (CASK) by three sen to bring it to 20 sen. There is a mismatch in the amount MAS earns and spends and the reduction in cost will balance the earnings and spending. MAS RASK is at 19.5 sen and CASK is 23 sen now. Singapore Airlines' RASK is 27 sen.

 

“A clear two sen margin will be (good) if we can generate higher RASK (amid) the competition in the market place. We just have to manage that properly,” Jauhari said after meeting fund managers yesterday.

 

Jauhari also felt the potential of cargo, engineering and MAS Holidays units had not been fully exploited. Those in the know claim that these units could potentially earn MAS about RM1bil in revenue over the next few years.

 

MAS recorded a RM37mil net profit for the third quarter of 2012 after six quarters of losses but sustaining that would be its biggest challenge, hence it has in place dozens of initiatives to boost revenues and reduce cost.

 

It also has a fairly new fleet which will bring down its fuel cost by about 8% and that will help reduce the airline's overall cost. The airline has revamped all its distribution channels to boost sales and that means inventory management is tight and it can react to fare price dumping within three to six hours.

 

Changes have also been made to the its website which used an archaic engine and payment gateway previously. MAS is also pushing for corporate sales to get more revenue. The utilisation of its aircraft has been extended to 12 hours and aircraft turnaround time reduced to 35 minutes now from 45 minutes, and the ultimate is 30 minutes.

 

There is also a centralised procurement system planned for implementation next year and its engineering unit had completed its first ever inventory check, said Jauhari.

 

“We are tightening procurement so that we have legitimate suppliers,” he said.

 

Asked if there was more room for cuts, he said “we do see with the tightening, the value of the engineering procurement reduced to RM3mil a day or even RM1mil on some days, and suddenly people are not asking for (equipment). Security has also been tighten at our engineering unit. The question we ask ourselves is, do we really need it before buying anything,” he said.

 

All contracts have come under scrutiny and he added that “all the initiatives are done to support sustainable revenue growth and we have to keep our cost low.”

The airline needs RM9bil in capital expenditure this and next year and the last pillar is the RM3.1bil rights issue which was announced this week but viewed negatively by some investors and led to a share price fall.

 

Jauhari said the funding was necessary but won't say how much the rights would be priced at. He said while some are selling the stock, “we are beginning to attract some new shareholders and they will subscribe to the rights given the current levels.”

 

But still many are not confident that all the measures put in place will turn the airline around given the many turnaround exercise that has not lifted MAS previously.

 

However, Jauhari said “we are confident of turning around. Everyone wants to see changes for the better, and this time we want to make it sustainable, we are seeing the recovery.”

 

Asked if he has the support of his team at MAS to push through all the initiatives, he said the staff engagement was better now and “if we keep losing money we will not be here next year. It is up to them to work out the problems with us or else (MAS) will not be here because no one will fund the airline.”

 

To a question if a privatise MAS was better, Jauhari said “that is a shareholder decision.”

 

http://biz.thestar.com.my/news/story.asp?file=/2012/11/30/business/12393057&sec=business

 

With MAS, it is still the issue of confidence

 

 

SELLING the Malaysia Airlines (MAS)growth story after so many turnarounds and restructuring can be tough call. It is tougher when the airline is calling a rights issue to raise RM3.1bil at a time when it is still not out of the woods, and reported only a small net profit of RM37mil for the third quarter of 2012.

In comparison, its regional peers are doing well and those in the low-cost business are trying to steal as much market share as they can.

For its many sceptics, no amount of reconstruction can save the airline. No amount of cash injection can keep it going for long before another turnaround is announced.

 

The obvious choice to the sceptics is to just shut it down and restart it. Others feel that taking it private is a better bet to clean up and then re-list.

 

Many seem to have an opinion on MAS given its decade long turbulent journey which has caused many heartaches as some have seen their share value eroded.

 

Those who do not take up the rights will see share dilution. MAS share price tumbled when the rights were announced and the shaving of 90 sen par value of its RM1 share has confused many, although it is just an accounting thing.

 

But there would be others that will find the current level attractive.

 

For Ahmad Jauhari Yahya (AJ), who is the group CEO of MAS, he has a different view and to him, there are really not many choices other than calling the rights and reducing the par value to 10 sen a share. The airline needs the money to sustain its operations.

 

Yesterday, for the first time since he became group CEO of the airline over a year ago, he met a group of fund managers and analysts. It might sound ironic that it was his first time meeting them when many would have expected him to see this group of investors a long time ago.

 

The meeting was organised by Maybank Investment Bank and those present included fund mangers from EPF, KWAP, Public Mutual, PNB, UOB Asset Management, Great Eastern, AmBank and others.

 

Among others, he talked about how the call centre call drop rate was 50% – imagine the number of transactions MAS was pushing away – but reduced to 25%; the inefficient engine and payment gateway for its website, the fare pricing was not aligned to market hence even they were losing corporate sales, and some illegitimate vendor invoices.

 

That is just the beginning of the journey to clean up the company by revamping all processes and procedures.

 

His analogy is, MAS needs to be re-set - like re-booting your computer and starting it again, because there is no other way if there is seriousness to turn the airline around. And even the board, chairman Tan Sri Md Nor Yusof, Tan Sri Krishnan Tan and Dr Mohamadon Abdullah are involved to make it happen.

 

Things can be a bit more easier than in the past because MAS had a fairly new fleet and the A380 is the star product, it is about riding on these factors to push sales and more importantly, as AJ says: “We are listening to our customers and the market.” That is critical for survival because competition is really keen in the market place.

 

The sceptics would still have doubts and some of the fund managers still had their reservations after listening to him for more than an hour.

 

They want to see more changes and more profits, though AJ assured that MAS is on the right track to profitability and he now has the buy-in from the staff to push things through. It is an issue about confidence and the rebuilding will take time because MAS has failed too many times in the past. Only time will tell if this is about sustainability.

 

http://biz.thestar.com.my/news/story.asp?file=/2012/11/30/business/12392375&sec=business

[KK Lee 5]

How MAS aims to become profitable

 

 

KUALA LUMPUR: Malaysia Airlines is targeting a 10% rise in revenue per available seat kilometer (RASK) or a two sen increase from now until 2014 that would translate in a profit margin of RM1bil, said its group chief executive officer Ahmad Jauhari Yahya.

 

It also plans to reduce its cost per available seat kilometer (CASK) by three sen to bring it to 20 sen. There is a mismatch in the amount MAS earns and spends and the reduction in cost will balance the earnings and spending. MAS RASK is at 19.5 sen and CASK is 23 sen now. Singapore Airlines' RASK is 27 sen.

 

“A clear two sen margin will be (good) if we can generate higher RASK (amid) the competition in the market place. We just have to manage that properly,” Jauhari said after meeting fund managers yesterday.

 

Jauhari also felt the potential of cargo, engineering and MAS Holidays units had not been fully exploited. Those in the know claim that these units could potentially earn MAS about RM1bil in revenue over the next few years.

 

 

 

Easier said than done, similar statements was made previously by IJ. MH has yet to find ways to increase RASK without detrimental to load or reduce CASK without affecting pax experience.

Edited November 30, 2012 by KK Lee

[BC Tam 2]

Changes have also been made to the its website which used an archaic engine and payment gateway previously.

 

 

 

A bit hard to swallow in light of fellow forumers' shared experiences

here: http://www.malaysianwings.net/forum/index.php?showtopic=17906&page=8

(admittedly though, the statement above did not specify it's changes for the better)

[KK Lee 5]

A deal could value Virgin’s debt and equity at as much as $1.3 billion, based on the median sale price of 0.3 times revenue in 43 airline transactions compiled by Bloomberg over the past five years. Profit-based comparisons aren’t possible as Virgin lost money in its most recent financial year.

 

http://www.bloomberg.com/news/2012-12-02/delta-said-in-talks-to-buy-virgin-stake-from-singapore-airlines.html

 

 

May be MH should use the new rights issue to buy into Virgin, which investment can be recovered by selling LHR slots.

[jani 0]

Maybank Report

 

http://research.maybank-ib.com/pdf/document/MAS_Management_Luncheon_20121204_MIB_2584.pdf

[alberttky 0]

KUALA LUMPUR: Malaysia Airlines (MAS) is aiming to maintain its positive fiscal reporting trend this year, fuelled by consistent and aggressive implementation of its Business Plan announced in December 2011.

 

Managing director Ahmad Jauhari Yahya said the airlines would continue to accelerate the implementation of its business plan this year, with added focus on increasing revenue and yields through aggressive marketing and promotions, and better capacity management.

 

He added the delivery of more new fuel-efficient aircraft as part of its fleet renewal programme, including the entry of Airbus A380 into its fleet as well as its entry into the oneworld alliance by Feb 1, 2013, were expected to have a positive effect on improved products and services delivery to its passengers, and ultimately return the group to profitability.

 

“At the same time, the airline group will actively continue to lower costs through improved cost management and driving productivity for better efficiencies system-wide,” he told Bernama.

 

MAS posted a net profit of RM37mil for its third quarter ended Sept 30, 2012, after six consecutive quarters of losses; a significant improvement compared with the RM478mil losses it recorded in the previous corresponding period.

 

Ahmad Jauhari said a key element in the national airline's turnaround was putting the funding plan in place. Bernama

 

http://biz.thestar.com.my/news/story.asp?file=/2013/1/4/business/12532210&sec=business

[khairuddin abu hanifah 0]

MAS: No Plans To Buy Stake In Airline Companies In India

By Saraswathi Muniappan

NEW DELHI, Jan 17 (Bernama) -- Malaysia Airlines (MAS) has reiterated that it has no plans to take up stakes in airline companies in India.

"We are not looking at investment (in airline companies) in India," its regional vice president for South Asia and Middle East, Azhar Hamid, said Thursday.

He was replying to a question if MASwould invest in airline companies in India, as foreign airlines were now allowed to take up to 49 per cent stake.

"We are still in the process of turning around," he said at the panel discussion on "Aviation in India -- The Way Forward," at the South Asia Tour and Travel Exchange Exhibition here today.

MAS posted a net profit of RM37 million for its third quarter ended Sept 30, 2012 after six consecutive quarters of losses, a significant improvement compared with the RM478 million losses in the previous corresponding period.

Azhar said MAS' current focus was its alliance with Oneworld starting Feb 1, 2013.

OneWorld is one of three largest global airline alliances.

The company aims to strengthen its competitive position considerably with an increased network that expands global coverage to 840 destinations in 156 countries.

-- BERNAMA

[Josh T 0]

Hopefully, MAS will stay in the black for the 4th quarter.