Malaysia Airlines (MAS) drastically reduce its losses in FY12, posting a reported net loss of RM432.6m vs a net loss of RM2.2bn in FY11. Both the reported and core net loss  were  in  line  with  our  and  street  estimates.  Effective  costs  management, stabilizing  fuel  price  and  fuel  consumption  efficiency  by  its  new  aircraft,  lower capacity due to route rationalization and  improved operating stats were among the factors  that  brought  MAS  back  on  track.  Maintain  BUY,  at  a  higher  revised  FV  of RM1.00, with 9.0x FY14f adjusted EV/EBITDAR. 

FY12  results spot  on.  MAS' FY12 reported net loss of RM432.6m and adjusted core net loss  of  RM748.2m  was  spot  on  with  our  estimates  and  in  line  with  consensus' numbers. The group's bottomline was largely buoyed by interest income totaling RM53.6m (+70.0% y-o-y),  which  we  believe  may  be  interest  earned  from  channeling  RM1.5bn  cash  from  its Sukuks  to  fixed  deposits  or  other  short-term  investments.  Although  its  FY12  EBITDA  of RM18.5m  was  below  what  we  expected,  the  number  is  still  encouraging  and  we  remain optimistic that MAS' operational performance will improve in the upcoming quarters. This is because  the  cash  raised  from  its  Sukuks  will  eventually  be  utilized  to  renew  its  fleet  to achieve efficiency and achieve a net positive effect. On a y-o-y basis, the national carrier's 4Q non-fuel costs shrank 33%, a sign that its cost management efforts are bearing fruit.

Source: OSK