PETALING JAYA: Several analysts have downgraded Malaysia Airlines (MAS) after the national carrier posted a net loss of RM242.3mil in the first quarter ended March 31 on rising fuel prices and stronger ringgit.
According to data compiled by Bloomberg, 12 of the 18 analysts covering the counter gave a “sell” call while five gave a “hold”. Only one analyst has a “buy” call on MAS.
Research houses including CIMB Equities Research, AmResearch, Hong Leong Investment Bank and ECM Libra have downgraded the stock to either “sell”, “hold” or “underperform”.
MAS posted a net loss of RM242.3mil in the first quarter against a net profit of RM310.04mil in the previous corresponding quarter after taking into account Airbus' compensation for late delivery. Revenue was 3.26% lower at RM3.19bil as fuel cost surged by 32% or RM321mil.
“MAS' poor results will shock the market and we expect significant downgrades by analysts, which may be the key de-rating catalyst,” CIMB Equities Research said.
The brokerage said MAS “significantly undershot” its expectations with a first-quarter core net loss of RM415mil. “We have forecast RM247mil core net profit for the full year and have been too optimistic in our projections,” it said.
CIMB Equities has downgraded MAS to “underperform” from “outperform” and reduced its target price from RM2.30, based on seven times core price-to-earnings, to RM1.52, pegged to two times price-to-book value. “The shift to book valuation is necessary, given the sharp reduction in our profit forecasts. We recommend a switch to AirAsia,” it said.
It expressed shock at MAS' performance in the international passenger segment, which saw a 5% year-on-year fall in yields, reversing three consecutive quarters of year-on-year improvement.
ECM Libra said MAS' results came in “below expectations” as it was badly hit by high fuel prices. The brokerage raised its financial year ending Dec 31, 2011 (FY11) fuel price expectation to US$120 a barrel and lowered its passenger and cargo yields for FY11 by 5% and 2.2% respectively.
“As a result, we expect MAS to incur a full-year losses of RM914mil,” ECM Libra said. It has downgraded MAS to “sell” as it did not expect the group to be profitable in FY11.
Bloomberg reported that Citigroup Inc had downgraded MAS to a “sell” from “buy” previously. It said MAS would continue to struggle over the near term amid volatile jet fuel prices, softening demand and a deterioration in yields.
OSK Research said MAS's core net loss of RM306.9mil was far worse than its and consensus earnings estimates of RM231mil and RM295mil net profit respectively.
“The airline faces a tough challenge in the form of poor load factors, negative yield growth and higher jet fuel costs.
“We downgrade our earnings to a core net loss of RM94.2mil as we cut capacity on the back of a worse-than-expected blow from soaring jet fuel price. We downgrade its fair value to RM1.10 with our sell' call maintained,” it said. |
