KUCHING: Malaysian Airline System Bhd (MAS) showed distinct improvement in fourth quarter for financial year 2010 (4QFY10) compared to 3QFY10 as cargo tonnage and capacity in October recovered from September’s slowdown.

STRENGTHENING RECOVERY: MAS shows distinct improvement in 4QFY10 compared to 3QFY10 as cargo tonnage and capacity in October recovered from September’s slowdown.

ECM Libra Capital Sdn Bhd (ECM Libra) stated that MAS’ load tonne kilometres (LTK) rose 9.3 per cent quarter-on-quarter (q-o-q) to 647.7 million kilometres (km), an increase of 2.1 per cent year-on-year (y-o-y).

Meanwhile, its capacity in available tonne kilometres (ATK) picked up by eight per cent q-o-q to 890.7 million km, upped 4.3 per cent y-o-y. Also, the weight load factor improved by 0.9 percentage point (ppt) to 72.7 per cent, added ECM Libra.

For FY10, the company’s LTK, ATK and load factor increased by 18.2 per cent, 11.4 per cent and 4.3 ppt respectively which showed a within expectation statistics.

In a separate matter, ECM Libra noted that the passenger traffic measured by revenue passenger kilometres (RPK) was up 10.1 per cent y-o-y top 10,060 million km in line with the 1.4 per cent y-o-y increase in passengers carried of 3.4 million during the quarter.

The capacity in available seat kilometres (ASK) grew 8.9 per cent y-o-y to 13,005 million km.

With growth in RPK outpacing ASK, load factor increased by 0.8 ppt y-o-y to 77.4 per cent. According to the research firm, the total passengers carried in 2010 was 13.1 million, an improvement of 9.8 per cent y-o-y with March, June to July and December being the busiest months of the year.

ECM Libra expected MAS to turn in operating profit of RM99.8 million on raised fares and surcharges in 2010. However, due to the increase in jet fuel cost, operating cost was expected at RM3.53 billion.

The anticipated hedging gains, stated in ECM Libra’s research report was of cumulated RM124 million.

As a result, the anticipated FY10 operating profit is RM226.4 million, beating the research firm’s estimated operating loss of RM65.6 million.

Therefore, ECM Libra pegged MAS at a target price of RM2.95 per share.