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Why the B N Government doesn't let MAS crash? - Koon Yew Yin
Koon Yew Yin
Publish date: Tue, 18 Feb 2014, 05:27 PM
Koon Yew Yin
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An official blog in i3investor to publish sharing by Mr. Koon Yew Yin.
All materials published here are prepared by Mr. Koon Yew Yin
All materials published here are prepared by Mr. Koon Yew Yin
An investment lesson
Koon Yew Yin 18th Feb 2014
MAS has just reported a loss of Rm 830 million for 3 quarters ending September 2013 which is larger than the loss of Rm 483 million in the same corresponding period last year. As usual, there are the incorrigibly optimistic cheerleaders for the airline who are unable to see the writing on the wall. These ‘experts’ are still touting that the company is in recovery mode and will soon be returning to profitability.
The market however sees the prospects for the airline differently. During the past few days the airline share has been trying to stay above 29 sen, the lowest share price that the airline share has recorded during the past few years. Without the support of government-linked funds and left to market forces alone, it is possible that the share price of MAS will drop even more.
Many investors still holding on to the share must surely be hoping that MAS will not try to ‘break the record’ loss of Rm 1,262 million set in 2005 or that achieved in 2011 when the loss was Rm 2,521 million.
For non-investors, the recurring losses of MAS are a great mystery especially when they are compared with the performance of SIA. I972 Malaysia-Singapore Airlines (MSA) became MAS and SIA. In the last 10 years from 2002- 2011 SIA reported a total pre-tax profit of Singapore $13,992 million, averaging S$ 1.4 billion per year.
Should the government continue to bail out MAS?
The most recent losses bring the total losses of MAS to at least over $3 billion. In any normal business, any company incurring large and sustained losses would have closed down or gone into bankruptcy. This has not happened to MAS yet but I think the time is right – many observers will say, long overdue - for the government to withdraw the open cheque book extended to MAS.
When planning the future of MAS, it is important that the government avoids not only the past mistakes but also takes a rational approach based on economic fundamentals. One line of simplistic thinking is that there is a bright and profitable future for MAS since the number of air travellers continues to increase by about 5-7 percent per year.
But if you look at the history of airline industry profitability, this is not the case for airlines worldwide. The fact is the airline industry requires huge capital and produces poor returns on capital employed. Hence, year after year, many airlines produce poor profit margins or outright losses.
Why you might ask is it that an industry with year-on-year rises in sales cannot generate good returns to shareholders?
It all comes down to the economic structure of the industry. One of the forces that limit profitability is the intensity of the rivalry between the leading airlines. There is over-supply leading to pressure on prices. This is exacerbated by a high degree of freedom for new competitors to enter the industries.
If, say, an airline route between two destinations is found to be reasonably profitable it is not long before new entrants move in or current airlines simply move their planes to this profitable route.
It is truly an industry governed by the principle of “survival of the fittest”.
The ego and elections factor
It would seem that every developing nation wanting to show off to the world its progress MUST have its own airline, regardless of the impact on an industry already grossly over-supplied, and regardless of whether they have the ability to manage efficiently. So there is a regular stream of announcements of new airline ventures.
Now that Malaysia has also done it and failed dismally, the next logical question to ask is why doesn’t the Malaysian government allow MAS to fold up or go under?
There are two main reasons: Firstly, the perennial optimism of managers and shareholders. “Just one more chunk of money will see us break through into profitability as we rout the opposition!” seems to be the credo of these parties based on their self and not national interest.
Secondly, there is government interference. This factor however is less found now as many governments have learnt not to come to the rescue of their airlines.
Malaysia has not learnt these lessons – initially for reasons of national pride tied to the ego of leaders but now increasingly apparently to save jobs and to prevent the retrenched employees from voting for the opposition. This may make sense politically but it is poor economics.
Let MAS fly or crash without further interference or delay is the only way forward in the national interest and save tax payers’ money.
Conclusion: I know many investors have bought MAS shares because it is so cheap and hoping that it would turn around soon. From my experience in picking stocks, I found that it is very difficult for non performing companies, especially companies in very competitive business to turn around. It is always easier for good companies to improve their profit because their production is often lower than demand and they can easily increase their selling price.
As I said many a time, I will never buy any share if I am not sure that the company can make more profit this year than last years and more profit in the next few years.
Besides Jaya Tiasa, I have Mudajaya, Kulim, Success Transformers and I also have small holdings in a few other small companies. Time will tell whether I am right. If I can write investment articles so profusely, I must be quite capable of selecting good performing stocks.
Remember, I am not asking to buy the shares that I own. But if you do, I am not responsible for your losses and I do not want any part of your profit.
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Discussions
7 people like this. Showing 50 of 58 comments
MAS just announced 4Q2013 loss of RM375mil, making FY2013 loss of 'only' RM1168mil. The record losses of RM1262 mil 2005 and RM2521 mil for 2010 remain intact. Now, is that an improvement or what?
2014-02-18 19:44
alas, looks like time to change the useless mgtm agn, n agn, get a real CEO who got balls to handle the MAS union..election over alrdy, probably another capital injection required soon fr PNB? Petronas? alrdy bleed coffers of EPF, Khazanah..
2014-02-18 20:22
trim the management, 1 good CEO and then managers only. c how will be saved from salaries and allowances
then focus on expenses, I know union is strong willed, however govt must be firm.
another 1billion down the drain, divided by maybe 6 million families in Malaysia all these wasted funds, rakyat will not have to suffer
2014-02-18 20:29
I think u still need an airline . But the mgmt responsible for the losses must be fired and replaced .
To further improve the airline , they need to look at their competitors ..
No bonus shld be given to the underperform CEO and directors ..
Union also need to be realistic and try to work for better of all ..
If all else fail then can declare bankruptcy and sell the airline to local investor who can better manage the airline while maintaining 1 golden share..
I think Mas can improved but need to implement drastic measures to reduce cost and routes which not profitable
2014-02-18 21:50
They need to run Mas like a real business instead of a charity home
They can keep pumping money into a loss making co OR they can restructure and remove all the fats
For example Recently Digi ex CEO join maxis and immediately he remove those ppl in mgmt but can't perform
I think similar thing needs to be done to Mas
The whole mgmt team shld be fired
2014-02-18 22:24
maybe govt should just shut down MAS, and let Air Asia be the official malaysian airline.
2014-02-18 22:33
Mas just like proton, alot of thing that outsource to cronies/ contractor eg like meals ...nasi lemak (telanjang) which cost are sky rocket high, no one dare to cut thier water paip .
2014-02-18 22:39
our govt talk about need to cut subsidies to improve the economy. but it is wasting our tax money on supporting MAS. our tax money could be better spend directly on the rakyat
2014-02-18 22:49
Malaysian airlines is the only airlines in the world who can afford to lose money yearly and still smiles.They lose $1.2 billion in 2013!
http://www.malaysiakini.com/news/254749
2014-02-19 01:28
Malaysia memang boleh....govt boleh...BN boleh...menteri menteri semuanya pun BOLEH ...
2014-02-19 02:57
Anwar Ibrahim: Malaysia Airlines vs Singapore Airlines
http://mediarakyat.net/2014/02/19/anwar-ibrahim-malaysia-airlines-vs-singapore-airlines/
2014-02-19 04:13
Thank you UMNO2KangKong for Anwar's speech on MAS vs SIA. All Taxpayers must click the above link and listen to Anwar's speech. I think I should consider sending my article to be published by other media.
By the way, Anwar's deputy Dr Lee Boon Chye will fetch me to talk in the Kajang by election next month and I need your support. Please optimus7 don't ridicule me when I talk in Kajang.
2014-02-19 04:42
i hate it when BN say no more money for subsidies but can still waste our hard-earned tax money on sustaining MAS.
2014-02-19 07:39
haha..corruption as usual. if the passenger rate above 80% do you think the airline will lose money?
2014-02-19 09:09
Mr Koon, what is your thought on Khoo Kay Peng and MUI Berhad future? You personally know Khoo Kay Peng?
2014-02-19 09:13
Would 'optimus7' dare show his face and publicly voice his ridiculous views in Kajang when Mr Koon speaks, presumably at a PKR ceramah? I doubt it. But if he does, please give him the stage for a few minutes to have his say. Hope he does not wet his pants having to speak in front of a possibly hostile crowd.
2014-02-19 09:14
I have an interest in getting MAS about a year or two ago. But after some study, decided not to. Main support foundation is govt's $$$ (i.e. tax payers' money). As it is, it will not do well continuously, maybe a year or 2 with some profits and far in between.
Mr Koon, appreciate your view on what is the MAIN MAS problem as to why it is not making profit (govt's interference in its operation, the direction from the mgt, staff?). If it is privatised, will it have a better chance of making a profit and why?
Thanks.
2014-02-19 09:31
Dear Mr Koon, please post the date n time you come to Kajang for Anwar Ibrahim campaine. I wish to make myself avilable. thanks.
2014-02-19 11:31
If SIA can, why can't MAS? There must be some underlying root causes need to be addressed SERIOUSLY by the Management and Government with strong WILL. Otherwise, it remains only as talk and talk for many years to come. BAILOUT must not be taken lightly for rescuing companies without solid plan & results.
2014-02-19 12:13
I seriously think khazanah nasional shld either have all the management fired and install Tony Fernandez as new CEO .
Or cutloss on MAS before the share really become "khazanah"..
2014-02-19 14:42
It will pull through, you just need to time yourself when to purchase and when to throw and run. All the new purchases of airlines will payoff later on.
2014-02-19 20:27
But since khazanah is main shareholder , I don't think the share price will drop a lot
At most khazanah take it private and restructure it into few companies and sell it piece by piece
2014-02-19 21:46
Mahathir says Islam is under threat but ....
he forgot his son is selling San Miguel Beer.
2014-02-20 03:03
Mahathir says Islam is under threat but ....
he forgot his son is selling San Miguel Beer.
2014-02-20 05:16
MAS had raised Rm 7.2B from share holders at 2007,2009 and 2013.Woh! Still want to buy 100 new planes?????
2014-02-20 08:26
Whatever a sensible govt should do is to cut off completely MAS by selling it at RM 2 to whichever interested party & stop this continuous bleeding & draining of taxpayers' money.
To help the rakyat - MAS Loss of 1,2 Bil can be used to pay compensation for 3 yrs for 14 highway tolls.
2014-02-20 09:16
Islam under closer scrutiny, not attack, says ex-mufti - Boo Su-Lyn (MMO) http://goo.gl/zjYTYE
2014-02-20 09:20
And this should have been done umpteen years ago during Dr M's era. Don't forget the continuous bleeding is still on with the RM12.5 Bil PKFZ scandal where the govt stands for guarantee to the loans & paying interests.
2014-02-20 09:20
Yeah, this is the rules of Malaysia's perfect competition. Whether I loss or lose, I'm still the winner. Anyway, is "good" for Mas to be there, so that we got cheap flights.
2014-02-20 11:55
Ownership is important , but not performance. Look at MRCB with projects given on their platter, yet it has borrowing of RM3 billion. And UEM Builder which was blacklisted in India and a Middle East country. Such mentality is weird - being proud of owning big corporate entities, at the country's and our expense. Only "sacred cows" are allowed to run these cos, regardless of their competence and integrity. Successive CEOs in SIA were Malaysians who make SIA an envy of airline industry all over the world.
2014-02-20 18:04
UMNO & Cronies world....
Harga beras dunia jatuh.....harga beras di Malaysia kekal,kayalah Mokhtar.
http://www.themalaysianinsider.com/malaysia/article/government-must-ensure-fall-in-global-price-of-rice-benefits-locals-says-op
2014-02-21 01:14
Yes the world rice price actually drop but because this unwise gov enter into contract with syed mokthar at high price for both rice and sugar , hence the rakyat have to pay for their mistakes by buying at high price ..
One may wonder why the need for the gov to benefit one individual /syed mokthar
2014-02-22 14:14
govt say no money to subsidize petrol, no money to subsidize electricity, no money to subsidize toll, no money to subsidize this and that, BUT GOT MONEY TO SUBSIDIZE MAS!
what nonsense our govt!
2014-02-22 14:31
Do you think they don't know what to fix in Mas? It has been like this for so many many years. Only when the MB of Selangor become the Finance Minister of Malaysia we can see Mas become emas! Then I will pour my investment into Mas even if there is a rights issue!
2014-02-22 16:19
Deteriorating Democracy in Malaysia
http://www.huffingtonpost.com/azeem-ibrahim/deteriorating-democracy-i_b_4813259.html
Most democracies achieve political legitimacy from a popular perception of effective and upright governance. Malaysia's self-described "best democracy in the world" is looking increasingly tarnished these days, following the recent election and return to power of its long-ruling Barisan National party. As President Obama plans a long awaited trip to Malaysia in April he should be aware of the toxic mix of racial politics being fomented by the Malaysian ruling party.
Despite losing the popular vote, the BN triumphed again in the country's 2013 elections, disappointing a growing opposition that had high hopes after a strong performance in 2008. The entrenched political hierarchy, instead of being humbled by its near defeat, is attempting to strengthen its hold on the country and its institutions, ignoring the need for change. Its autocratic insistence on adhering to past practices of repression, racism, corruption and cronyism have led observers to qualify its system of government as semi, quasi or limited democracy.
In the latest World Press Freedom index, Malaysia has hit an historic low, ranking 147 out of 180 countries, reflecting the government's increased repression of media freedoms by suspending publications that dare to criticize the Prime Minister, denying licenses to media outlets, censoring publications and restricting access to information.
The declining popularity of the Naijib Razak government is reflected in the increasing popularity of Anwar Ibrahim's Pakatan Rakyat coalition which is calling for ending the erosion of democracy in Malaysia. The fact that Ibrahim's party won the popular vote is an indication that the current electoral system is due for reform based on the principle of popular sovereignty, not on the basis of a selective franchise. In Malaysia all votes are not equal, with the apportionment of seats to states not based on their populations, with the result that rural votes have more weight than urban votes.
Restoring public confidence in the Electoral Commission and election process will be crucial to a healthy and mature democracy that will be responsive to the interests of all citizens, regardless of ethnicity or religion. The BN insists that Malaysia is a democracy simply because it has had regular elections with the latest being the 13th instance of electing a government by the ballot box. But democracy demands more than just elections. Protection of civil liberties and political rights, the freedom of the press and the right to assemble, checks and balances, transparency and accountability are all as important as process.
In the complex plural society of Malaysia, with its highly educated generation of young people, it is therefore inexplicable that the government should recently choose to inflame religious tensions by forbidding Malaysian Christians from using the word "Allah."
About 2.6 million Malaysians are Christians and have long complained about discriminatory policies that favor Muslim Malays. The Prime Minister glibly praises Malaysia as a multi-ethnic melting pot, yet fails to protect the rights of minorities to worship as they see fit. The ban on Christians using the word Allah -- which has been in Malay translations of the Bible for 400 years -- is seen to be pandering to extremists from a right-wing fringe of the ruling party. Several independent United Nations human rights spokesmen have called on the Malaysian government to rescind the ban and secure the right to freedom of expression of Christian publications, instead of exacerbating tensions within religious minorities in the country.
The controversy is a symptom of a deeper unease as the country is becoming increasingly polarized along ethnic and religious lines. Instead of building the idea of a Malaysian nationality, the present government seems to have retreated into divide and rule divisive sectarian politics. In contrast, opposition leader Anwar Ibrahim advocates a common identity based on universal citizenship and his message of inclusive and pluralist democracy has a particular resonance at a time when Malaysia is struggling to live up to its legacy as a pluralistic and open society.
Anwar Ibrahim recently announced he would be contesting for a state assembly seat in Selangor, Malaysia's most prosperous and ethnically diverse state. Many believe once elected he may assume the position of Chief Minister, giving him a platform on which to resolve some of these contentious issues and confront the racially charged rhetoric emanating from the ruling party. If he does succeed in the upcoming election instead of headlines reading "Death of Democracy in Malaysia," we will begin to see a resurgence of optimism as the underlying shift in political attitudes in Selangor bring about a renaissance for democracy in the nation.
2014-02-22 16:27
Teresa Kok Onederful Malaysia CNY 2014 sarikata BM
https://www.youtube.com/watch?v=1vOwkXRvtcE
Teresa Kok
Klip video "Onederful Malaysia" kini dengan sarikata Bahasa Malaysia, membuktikan ia adalah satira politik yang tidak menghina mana-mana kaum atau agama; mendedahkan fitnah para pemimpin UMNO.
2014-02-22 16:34
Patut lahhhhhh MAS rugi lagi tahun lepas.......
http://s11.postimg.org/wtwyhw8wj/mas.jpg
2014-02-22 17:15
Telling the truth is a crime in Malaysia
http://www.theantdaily.com/news/2014/02/23/telling-truth-crime-malaysia
2014-02-23 13:04
Blessed with oil money, but why is Malaysia in huge debt?
http://www.theantdaily.com/news/2014/01/14/blessed-oil-money-why-malaysia-huge-debt
2014-02-23 13:55
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2014-02-18 19:03