Period 2Q12/1H12
Actual vs. Expectations
2Q12 core net loss of RM205m was within expectations. 1H12
core net loss of RM561m already made up 45% of our FY12E core net loss forecast
of RM1.2b but exceeded consensus’s estimates of RM522m.
Dividends No dividend declared, as expected.
Key Result Highlights
1H12 core net loss of RM561m was a 32% improvement vs. 1H11
core net loss of RM824m, due to reduction of fuel cost by 10% and other operating
cost by 5%. MAS have also recorded RM39m derivative loss and RM81m of
exceptional gain in 1H12 (Airbus compensation of RM45m in 2Q12).
QoQ, 2Q12 core net loss reduced to RM205m from RM356m on the
back of yield improvement which was mainly supported by higher fuel surcharge during
the period (+26%). The management has indicated that it will continue to impose
fuel surcharges on the back of up-trending crude oil prices in 2H12.
YoY, 2Q12 revenue slid 6% while core net loss narrowed by
56% due to route rationalisation which saw 12% reduction in capacity and
operating cost.
Outlook There is still a lot of uncertainties, albeit
the improved 2Q12 which saw narrower losses. 3Q12 will be challenging for MAS
as 3Qs are seasonally weak quarters for airlines, coupled with volatile crude
oil prices. MAS hedged 15% and 35% of its 3Q12 and 4Q12 fuel consumption at
USD103 per barrel. However, with crack costs trending upwards, we expect FY12E
fuel cost to eventually increase to a range of USD125 to USD RM135/barrel.
Change to Forecasts
No change in our FY12-13E earnings. Key drivers to see
narrower losses are yield improvement and further austerity measures.
Rating Maintain UNDERPERFORM
We are maintaining UNDERPERFORM rating on MAS with. Although
financial performance appears to be improving, there are too many unknown
quantities including largely anticipated volatile fuel environment.
Valuation Higher Target Price of RM1.06 (RM1.02
previously) as we roll-over our valuations to FY13E using 8x EV/EBITDA
(previously 2.5x PBV) as we expect MAS to record operating profits in
FY13.
Risks Global recession and sharp spike in crude oil
price.
Source: Kenanga
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