MAS (SELL)

Gaining Traction

• Inline with our forecasts and consensus with 1H12 core loss of RM543m. We expect MAS to incur minor losses for 2H12.
• EBITDA margin improved qoq on improved revenue (higher traffics and increased surcharges) while overall cost was down slightly qoq.
• Received late aircraft delivery charges of RM45m in 2Q12, and management expect to receive more in 2H12.
• MAS continues to focus in reducing unit cost, by increasing fleet utilization, streamlining its processes and improve staff efficiencies.
• Net gearing improved to 4.1x in 2Q12after recognizing RM1bn junior sukuk as equity. The adjusted net gearing would deteriorate to 14.2x.
• Maintain sell with unchanged Target Price of RM0.92.

Source: Hong Leong Investment Bank Research - 15 August 2012