Malaysian  Airlines  System  (MAS)’s  April  operating  statistics  were encouraging  as  load  factor  rose  590bps  to  77%.  We  attribute  the positive  numbers  to  strong  growth  in  its  international  passengers segment,  largely  boosted  by  its  alliance  with  one world .  We  think  the market is turning positive on MAS’ turnaround and hence, maintain our BUY call, with our FV adjusted slightly lower to MYR0.48. 

- Growth  still  decent.  MAS’ April operating statistics  indicate  that  the airline  experienced  decent  growth  as  its  overall  load  tonne  kilometres (LTK)  improved  by  19.4%  y-o-y  while  revenue  passenger  kilometres (RPK) jumped 23.5% y-o-y. Meanwhile, the airline’s load factor rose 380 bps  y-o-y,  mainly  driven  by  the  international  passenger  segment  (RPK: +24.6% y-o-y, load factor: +450 bps y-o-y).  

- 2Q  seasonally  weaker.  We  expect  MAS  to  see  softer  growth  as  the second  quarter  of  the  calendar  year  is  a  seasonally  weaker  one  for  all airlines.  Having  said  that,  we  expect  positive  growth  on  y-o-y  basis, especially in the international passenger segment, as we believe that the airline’s participation in the oneworld alliance is a boost, especially in the airline’s efforts to turn around.

- Rights  over-subscription  a  show  of  confidence.  We  are  heartened that  MAS’ rights issue  shares  were  over-subscribed  by  41.5%,  which may be an indication that investors are becoming more confident in the company.

- 1QFY13 results preview. MAS, which is due to announce its 1Q results tomorrow,  is  likely  to  post  a  profit  in  1Q  on  the  back  of  a  higher  load factor  of  76.6%  and  a  lower  jet  fuel  price  of  USD128/barrel,  further bolstered  by  higher  yields.  Note  that  it  posted  a  core  loss  of  only MYR49.7m in 3QFY13,  with its load factor and average jet fuel price at 74.5% and USD131/barrel respectively then.  

- BUY, with a slightly lower FV. As we update our model to incorporate MAS’  FY12  audited  numbers,  we  adjust  our  FV  slightly  lower  to MYR0.48  (vs  MYR0.50),  based  on  9x  FY14f  adjusted  EV/EBITDAR.

Source: RHB