Stock Name: MAS
Company Name: MALAYSIAN AIRLINE SYSTEM BHD
Research House: HWANGDBS



HwangDBS rates Malaysian Airlines Bhd a "hold" with a price target of RM2.01.

"We cut FY11-12F earnings by 3-6 per cent after imputing lower passenger yields and higher interest expense, which more than offset impact of weaker USD and lower level of fuel requirement hedged.

"We expect MAS to turnaround next year driven by y-o-y yield improvement as market conditions improve, while the USD is expected to continue to weaken against the MYR," says Hwang DBS.

"But MAS' expansion in the low-cost segment could start a price war between low-cost carriers and pressure yields. Though we expect MAS to turnaround next year, we note that its expansion into the domestic and regional low-cost segment might create downside risk to yields.

"Furthermore, MAS' net gearing level is expected to rise over the next two years as some of the new aircraft would be owned by the Group," says the research outfit.

"This makes it crucial for MAS to deliver consistent earnings to meet its future capital and debt commitments."