MAS reports Q3 net loss of RM484m

[alberttky 0]

PETALING JAYA: Following several quarterly losses, indications are that Malaysia Airlines (MAS) will return to the black in its third quarter this year, posting a modest net profit of just under RM10mil, according to analysts.

And while this “return to profitability” is unlikely to nudge MAS into a full year profit for the current financial year, some analysts reckon that the “flurry of activity” within MAS can lead it to a profitable financial year ending 2013 a year ahead of what management has guided for.

Maybank Investment Bank recently stated in a report that MAS' operational costs were coming down. The report also highlighted that MAS had disposed many old aircraft and replaced them with new, more fuel-efficient aircraft.

Among the initiatives that MAS had embarked on was taking into service two Airbus A380 super-jumbo aircraft, which boasted unit cost savings of 15% to 20% compared with the Boeing 747-400.

In addition, MAS has cut 10% to 12% of its capacity on loss-making routes, which has helped to plug losses.

Sources also told StarBiz that last weekend, the MAS senior management team had met to map out the business strategy for next year. Among the topics discussed was to “sweat the assets to enhance income”, especially at the subsidiary levels.

Among the units identified, the sources added, were the cargo division, MAS Engineering and MAS Holidays.

A detailed business plan to get more revenues out of these assets is expected to be presented at the MAS' board of director's retreat in Langkawi early next month.

In filing with Bursa Malaysia yesterday, MAS said that it had executed a funding deal with special purpose vehicle called Turus Pesawat Sdn Bhd for an Islamic financing arrangement of up to RM5.311bil. Turus Pesawat is wholly-owned by the Ministry of Finance.

The financing is to be used for the purchase of eight aircraft comprising six Airbus A380-800, one Airbus A330-200F and one Airbus A330-300.

The A380 is a key element in MAS' return to profitability.

“The A380 flight load for its KL-London route is very good and the airline is upgrading it to a second daily with the A380. If it can maintain the load factor, it will be positive for MAS,” said a source.

MAS commercial director Hugh Dunleavy was recently quoted in a report by CAPA Centre for Aviation as saying that MAS would use theA380 for its daily Kuala Lumpur-Paris flight after receiving its fifth A380early next year.

It added that for the larger South-East Asia-UK market, MAS would move up two spots, overtaking Qantas and British Airways, after it upgraded its second daily London flight to the A380.

MAS is currently the fourth largest carrier in the South-East Asia-UK market behind Singapore Airlines, Qantas and British Airways.

“Kuala Lumpur-London is a flagship route for MAS and Paris is also a high profile destination. As a result, MAS has a lot to gain from using theA380s on these routes,” CAPA said.

http://biz.thestar.com.my/news/story.asp?file=/2012/11/21/business/12348610&sec=business

[flee 5]

This merely brings it back on schedule (based on AJ's original recovery plan).

 

It looks like the cutting of unprofitable routes had significant impact on the bottom line.

 

It also looks like having a modern, fuel efficient fleet also had a big impact on costs - those new B738s, A333s and A380s are definitely contributing to the stronger performance. Lets hope that MH management does not neglect ordering new aircraft to replace old, fuel guzzlers in future.

 

There is still a lot to be done to turn MH around. Hope that the management are able to make the tough decisions, now that the low hanging fruit has been harvested.

Edited November 21, 2012 by flee

[KK Lee 5]

[Sri Ramani K. 0]

http://www.themalays...loss-of-rm484m/

 

MAS reports Q3 net loss of RM484m

 

KUALA LUMPUR, Nov 27 – Malaysian Airline Systems Bhd (MAS) said today, it recorded a net loss of RM484 million in the third quarter ended Sept. 30 compared with a net loss of RM1.247 billion in the same quarter a year earlier.

 

The better performance was due to its route rationalisation programme which helped the airline cut fuel costs, the national airline said in a statement.

Revenue fell two per cent to RM3.5 billion year on year.

 

The airline reported a small operating profit of RM4 million, ending a six quarter run of losses. In the same quarter a year ago, the airline reported an operating loss of RM192 million.

Moving forward, the airline said its focus is to increase revenue and manage costs.

 

Shares in Malaysian Airline was unchanged today at RM1.01 a share, outperforming the benchmark stock index’s 0.6 per cent drop. – Bernama

 

Edited November 27, 2012 by Sri Ramani K.

[flee 5]

Bursa Malaysia filing:

http://announcements... 2012 (MAS).pdf

 

And there's more - they are reducing the par value of their shares from RM 1 to RM 0.10:

http://announcements...nnouncement.pdf

 

Also calling for more equity. MH is really swallowing cash at a huge rate! And that does not include borrowings that the govt. is doing on its behalf.

[BC Tam 2]

And there's more - they are reducing the par value of their shares from RM 1 to RM 0.10:

Sort of like preparation for syiok sendiri excercise ?

Or perhaps the market may see it otherwise and downgrade it to junk value ?

[Ashraf 0]

Well when you reduce destinations, you will most likely reduce costs as well.

[Mushrif A 3]

The real news is the massive capital restructuring and the rights issue, with Khazanah offering to take up all of the shares. So - that, ladies and gentlemen, means that you & I are funding MH again. Of course, it allows MH to start with a virtually clean slate.

 

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

[Lock SH 0]

Thank you BN govt..........'Rakyat Di Dahulukan' .........

 

 

[flee 5]

MAS Unveils Details Of Proposed Capital Restructuring & Rights Issue

KUALA LUMPUR, Nov 27 (Bernama) -- Malaysian Airline System Bhd (MAS) has unveiled the details of its proposed capital restructuring exercise and renounceable rights issue.

 

In a statement Tuesday, MAS said the capital restructuring aimed to rationalise its balance sheet and reduce the accumulated losses to the extent possible by reducing both the par value of each existing ordinary share of MAS and its share premium account.

 

It said the par value adjustment involved a reduction of 90 sen for each existing ordinary MAS share of RM1 each where the reduction in share premium account would give rise to a credit reserve of up to RM8,003.91 million which would be used to reduce the accumulated losses of MAS.

 

"Based on audited accounts as at Dec 31, 2011 and unaudited accounts as at Sept 30, 2012, the accumulated losses stood at RM7,863.72 million and RM8,188.04 million respectively," it said.

 

MAS said the proposed exercise would not have any effect on its net asset position.

 

Post-completion of the proposed capital restructuring, MAS intended to implement a proposed renounceable rights issue to raise gross proceeds of up to RM3,100 million.

 

"The basis of entitlement and the issue price have not been fixed at this juncture to provide flexibility to the board in respect of the pricing and the number of rights shares to be issued.

 

"Major shareholder, Khazanah Nasional Bhd, has given MAS its irrevocable and unconditional undertaking to subscribe for its full entitlement under the proposed rights issue," it said.

 

The proceeds from the proposed rights issue would be used to finance capital expenditure and working capital requirements and to reduce borrowings, it said.

 

MAS chief executive officer, Ahmad Jauhari Yahya, said the proposed restructuring would reduce accumulated losses to better reflect the company's fundamentals and to facilitate its objective of attaining a stronger financial position moving forward.

 

"The proposed rights issue, which is the fourth pillar in the long-term financing plan we announced earlier this year, will provide MAS with improved liquidity and financial flexibility, crucial in allowing us to execute our financing plans in the near term," he said.

 

On the ongoing turnaround of MAS, Ahmad Jauhari said the company has made significant progress.

 

"Costs have been reduced during the three quarters of this year, covering big expense items like fuel, advertising, leasing charges, aircraft handling and landing charges.

 

"These positive outcomes indicate that we are on track and encourage us to strive further while we are also focused on driving sales and high yields," he said.

 

MAS has appointed CIMB Investment Bank Bhd as principal adviser for the proposed capital restructuring and proposed rights issue.

 

It said barring any unforeseen circumstances, the proposals were expected to be completed by the second quarter of 2013.

[KK Lee 5]

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.

Edited November 27, 2012 by KK Lee

[alberttky 0]

MAS posts profit, unveils plans to raise RM3.1bil via rights issue

 

 

PETALING JAYA: As Malaysia Airlines (MAS) returns its first net profit of RM37mil for the July-September period after six consecutive quarters of losses, it announces plans to raise RM3.1bil via a rights issue and reduce its par value per share from RM1 to 90 sen next year.

The national carrier was able to turn in the profit after it took drastic steps to cut unprofitable routes and reduce cost.

The net profit is inclusive of unrealised foreign exchange gains and a one-off write back from its joint venture with an Indian party for maintenance, repair, and operations business. A year ago its net loss for the quarter was a hefty RM477mil.

Operationally, MAS made a small profit of RM3.9mil versus a net loss of RM191mil for the period in 2011.

Revenue for the third quarter was lower at RM3.4bil from RM3.5bil due to decreased passenger traffic.

The airline reported earnings per share of 1.11 sen versus a loss per share of 14.29 sen. No dividend was declared for the the quarter.

“Revenue initiatives have started to gain traction in the market and combined with the improved utilisation of the fleet and our manpower, we are beginning to see the results of our hard work,” said MAS groupchief executive officer Ahmad Jauhari Yahya.

For nine months ended September, the airline reported RM483mil in net loss versus RM1.2bil in net loss in the previous corresponding period. MAS operating loss for first nine months of 2012 was RM404mil versus RM975mil previously.

Revenue for January to September was lower at RM9.8bil versus RM10.2bil and its net loss per share was 14.48 sen versus 37.30 a sen.

MAS' modest breakeven for the third quarter was anticipated by analysts although many still cautioned that the airline would remain in the red for the full year because it would be difficult to reverse the RM483mil net loss it recorded for the January to September period even though the fourth quarter is traditionally a peak period for the air travel sector.

“The spike in jet fuel prices will weigh down the company's performance and therefore the fourth quarter will only be slightly better than the third quarter,” said Maybank Investment Bank analyst.

He has a “buy” call on the stock with the target price at RM1.20 a share. Yesterday, the stock was unchanged at RM1.01 a share.

Although Ahmad Jauhari said he was encouraged by the improved trend, he also knew that the “challenging economic environment around the world, increased competition and capacity, and continued high fuel costs could create havoc to air travel and airline profits.

However, he added “although the journey ahead is long, with focus we will succeed.”

As to the rights issue and par value adjustment, MAS said it would be completed by the second quarter of 2013. It said the par value adjustment gave rise to a RM8bil credit reserve that it intended to use to reduce its accumulated losses.

The exercise will strengthen its balance sheet with proceeds from the rights issue to be used to finance capital expenditure and working capital to reduce borrowings. The airline has cash of RM1.4bil as of end-September.

“The capital restructuring will allow MAS to start on a clean slate and that will make it easier for the airline to get loans and financing,” said an analyst.

Apart from that, MAS said it was supposed to return 10 B737-400aircraft by end 2012, but decided to buy back the aircraft for US$6.4mil or US$64mil in total. This was done because the cost of re-delivery under the lease terms was too costly.

The airline will use the aircraft for its domestic routes while waiting for the new B737-800 deliveries.

MAS said the B737-400 will be used till 2014, after which it would be disposed off.

 

http://biz.thestar.com.my/news/story.asp?file=/2012/11/28/business/12380186&sec=business

 

Can't wait to see them get rid of those old 737.

[leon t 0]

if one is to look at the few times that MAS have lost billions and beenrestructured several times over, the total losses MH incurred since its started will be no less than rm8 billion!

[flee 5]

Taxpayers lost big time - remember the RM 8 per share that was paid to TR to buy MH back?

 

As at 9.38 am, MAS share price has shed 18 sen to RM 0.83. The market is already taking into account the 10 sen par value capital restructuring proposal.

[BC Tam 2]

So Bernama has it as

..... the par value adjustment involved a reduction of 90 sen for each existing ordinary MAS share of RM1 each .....

new par value = RM0.10

 

thestar online has it as

..... and reduce its par value per share from RM1 to 90 sen next year .....

new par value = RM0.90

 

Any idea which is which then ?

 

Anyway, trusty sugar daddy been called upon to cough up yet again - same ritual I suppose

Real surprise was that it took so long to come about

[flee 5]

So Bernama has it as

 

new par value = RM0.10

Bernama is correct.

 

http://announcements...nnouncement.pdf

[BC Tam 2]

Thanks Flee !

[Mushrif A 3]

And in the past, we had gullible people believing that there are no bail-outs (note the plural) of MH.

[flee 5]

MAS fell as much as 20pct after plans for rights issue

http://biz.thestar.com.my/news/story.asp?file=/2012/11/28/business/20121128102212&sec=business

[amanairways 0]

The real news is the massive capital restructuring and the rights issue, with Khazanah offering to take up all of the shares. So - that, ladies and gentlemen, means that you & I are funding MH again. Of course, it allows MH to start with a virtually clean slate.

 

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

 

So how much was the QPR sponsorship ? And what was the D7 arrangement for ?

 

So Bernama has it as

 

new par value = RM0.10

 

thestar online has it as

 

new par value = RM0.90

 

Any idea which is which then ?

 

Anyway, trusty sugar daddy been called upon to cough up yet again - same ritual I suppose

Real surprise was that it took so long to come about

 

Not coming from a finance background nor do I partake in the stock market ... What in the world is par value ?

 

[jani 0]

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

Edited November 28, 2012 by jani

[Mushrif A 3]

So how much was the QPR sponsorship ? And what was the D7 arrangement for ?

 

 

Go through the link given in #5 above.

[jani 0]

Just as I was saying... TMI has since changed its headline from "MAS reports Q3 net loss of RM484m" to "MAS registers profit after six quarters of losses"

Edited November 28, 2012 by jani

[flee 5]

Just as I was saying... TMI has since changed its headline from "MAS reports Q3 net loss of RM484m" to "MAS registers profit after six quarters of losses"

Both are correct. First headline is for the nine months from January to September whereas the second only focus on the 3 months to September.

 

For the whole year (2012), MAS is still expected to lose money, but the losses are somewhat reduced. However, there has been lots of creative accounting. So far, they have only harvested the low hanging fruit. For more meaningful cost reductions, they will need to address their real weaknesses - very tough decisions lie ahead. Union and political pressure will now test AJ and his Board. Lets see how tough he is when faced with such challenges.

Edited November 28, 2012 by flee

[flee 5]

I know it is not easy to digest, but the numbers here tell the story more than the media reports:

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/all/655E7964BDC2014348257AC30035B7CC/$File/Bursa%20Q3%202012%20%28MAS%29.pdf