MAS (SELL)

Gloomy Outlook

'''' Newly appointed MAS CEO, Ahmad Yahya highlighted the group immediate strategies:

1.'' Withdrawal from unprofitable routes ' long hauls;

2.'' Redeploy aircrafts into more profitable routes ' short and medium hauls;

3.'' Active yield management to improve overall revenues;

4.'' Aggressive in marketing and sales;

5.'' Upgrade fleets efficiency with new aircrafts delivery; and

6.'' Simultaneously return leased old aircrafts.

'''' Banking on potential cash back from PDP (Pre-Delivery Payment - currently RM3bn), management insisted that there will be no need for cash call exercise despite current low cash level at RM1bn.

'''' MAS expects 4Q11 to make operating losses due to weak forward bookings, downward trend in yields, and high jet fuel prices. On FY12 outlooks, MAS hopes to at least achieve operational breakevens.

'''' MAS has hedged 24% of its 4Q11 jet fuel requirement at US$122/bbl and 9% of FY12 requirement at US$127.

'''' Maintain SELL with unchanged TP of RM1.19.