When we buy a stock, we are not just buying current year profit right? It has to be forward looking...

AAX flights are more price-elastic given the long haul nature and that most people are on leisure travel. Plus, now the field is levelled, as in an AAX flight vis-a-vis a MAB or Malindo or other FSCs are priced more closely. Consumers may be willing to pay a little more to get full service.

In short, the PSC hike affects AAX much more than AA, so it is not right to draw comparison between the two.

PETALING JAYA: The hike in passenger service charge (PSC) rates, which will be implemented next year, will affect the passenger volume growth of low-cost carriers (LCC) in the near term, said Affin Hwang Capital.

"While consensus has been expecting PSC hike by end-2016, we were surprised by the steep quantum, based on the figures quote by theSun. Immediate impact could lead to passengers' volume loss for both airlines under our coverage," it said in its report last Friday.

"AirAsia X (AAX) is especially vulnerable to any load factor loss, given it has barely broken even in 2Q16. AirAsia will be impacted as well, but of lesser extent given its more intra-Asean centric portfolio," it said.

Last Thursday, theSun reported that the new PSC rates have been approved by the Cabinet. The new PSC rates would be RM11 for domestic flights, RM35 for flights to Asean countries and RM73 for international flights out of both KLIA and klia2.

The current rates are RM9 for domestic flights and RM32 for flights to Asean countries while international flights out of KLIA and klia2 are RM65 and RM32 respectively.

Transport Minister Datuk Seri Liow Tiong Lai confirmed the hike last Friday, saying that the new rates will be implemented from Jan 1 next year. Details are to be announced by the Malaysian Aviation Commission (Mavcom) in due course.

"The new PSC rates attempt to standardise the charges at all airports in Malaysia, most notably the huge difference in KLIA and klia2. All categories will likely see an increase in the range of 9-128%, with the biggest quantum hike for international PSC (ex-Asean) in klia2. Apart from domestic and international categories, the new PSC rate structure will feature a new category for intra-Asean flights," said Affin Hwang Capital.

It expects the move to affect AAX more, as any material drop in passenger load factor could tilt the carrier back to losses, given the breakeven level is close to current load factor.

Although LCC passengers segment have price elasticity, there could potentially be some contraction in volume growth for AAX as the costs of flying would be materially higher after the PSC hike.

However, AirAsia is unlikely to be materially impacted. Although 77% of klia2 passengers transit in Asean routes through AirAsia, the real figure should be closer to the region of 60-70%, as the airline also runs non-Asean routes namely, some southern cities in China, which are not wholly-covered by AAX.

"Bulk of klia2 flights are still dominated by AirAsia Group with up to 98% capacity being deployed for the group, according to management. We do not have the breakdown of AirAsia capacity deployed on non-Asean routes, but it's unlikely to be substantial as a whole. AirAsia still runs on an intra-Asean business model and its capacity is unlikely to be materially impacted by the PSC hike."

The new PSC structure will benefit airport operator Malaysia Airports Holdings Bhd (MAHB), as it will lead to a blended 23% increase in PSC-related charges, which contributes close to 20% of the group's revenue after netting off Turkey's operations.

Although near-term passenger movements will likely be negatively impacted, the quantum of the hike would likely be more than enough to offset the volume drop.

"We do not expect significant impact to the extent that it impedes growth and we do not expect a contraction to follow thereafter. The hike quantum is relatively affordable and reasonable on absolute basis, apart from international passengers flying out of klia2," said Affin Hwang Capital.

It does not expect the 12% increase in KLIA to materially disrupt passenger movements, as full service carrier passengers are likely to be least price sensitive, compared with LCC passengers in klia2.

"The PSC hike will lead to step-up increase in topline, but not all charges will flow to the bottomline due to the standing revenue sharing agreement with the government in the range of 8-10%. Our back-of-envelope calculations show that MAHB's FY17E earnings could potentially more than double year-on-year, largely due to the low base effect and its high operating leverage," it said.

It maintained its sector weighing at "neutral" and made no changes to the ratings and earnings estimates for companies within its coverage, pending Mavcom's official announcement.

"All things being considered, we believe the PSC hike is a reasonable and conscious decision by the authorities to standardise the charges across the airports. The hike was also in part to compensate MAHB as a fair investment return for the RM4.5 billion price tag for the construction of klia2, and to ensure quality upkeep of the airports," it said.

Q2 Malaysian consumer sentiment index has improved, representing 2nd quarter of recovery.

https://www.mier.org.my/csi/

Also, Q2 Malaysian consumer sentiment index has improved, representing 2nd quarter of recovery.

https://www.mier.org.my/csi/

10k Bezza orders to date.

KUALA LUMPUR (July 26): Perusahaan Otomobil Kedua Sdn Bhd (Perodua) expects the local automotive industry to be "very challenging" in the second half of 2016, from fierce competition amid tepid consumer sentiment.

President and chief executive officer Datuk Dr Aminar Rashid Salleh hopes its newly-launched sedan, Bezza, will tide the car maker over the tough situation.

He is expecting Perodua's sales to be driven by Axia and Bezza sales, over the next six months.

As at today, Bezza's booking has reached 10,115 units, with 500 deliveries since it was launched on July 21.

"We began mass production of the Bezza since last month and have a ready stock of 7,000 units as at July 21. By the end of this month, we expect to have 9,000 units ready for delivery nationwide," Aminar told a news conference today.

http://www.theedgemarkets.com/my/article/auto-sector-be-very-challenging-2h-says-perodua

Just for everyone's reference,

1. MY and SG has signed the HSR MOU today: http://english.astroawani.com/malaysia-news/malaysia-and-singapore-sign-iconic-high-speed-rail-mou-111457

2. MATRIX is a big beneficiary: http://www.theedgeproperty.com.my/tags/high-speed-rail

3. The proposed station is close to MATRIX's Bandar Sri Sendayan: http://www.mainprop.com/2015/05/location-of-seremban-station-of-hsr.html

Yeap, matrix is one of the biggest beneficiaries of HSR

URL: http://www.thesundaily.my/news/1904624

High speed rail MOU to be signed tmr.

PUTRAJAYA: Malaysia and Singapore leaders will witness the signing ceremony of the memorandum of understanding (MoU) concerning the Kuala Lumpur-Singapore High Speed Rail on Tuesday.

The event will be held in conjunction with Singapore Prime Minister Lee Hsien Loong's one-day visit to Malaysia tomorrow (July 19).

Wisma Putra in a statement today said Malaysian Prime Minister Datuk Seri Najib Abdul Razak and Lee during the visit would witness the signing ceremony of the MoU between the Government of Malaysia and Government of Singapore.

The proposed 350-km line will begin in Bandar Malaysia, seven km from the Kuala Lumpur city centre and end in Jurong East, Singapore.

The proposed train service is expected to cut travel time to about 90 minutes from about five hours by road between Kuala Lumpur and Singapore.

The proposed train is expected to have five transit stations, namely cities of Seremban, Ayer Keroh, Muar, Batu Pahat and Iskandar Puteri.

The Wisma Putra statement said that Lee was also scheduled to have a four-eyed meeting with Najib to discuss bilateral issues of mutual concern.

Malaysia and Singapore enjoy excellent ties in various sectors including trade and investment, social, education, defence and security, as well as people-to-people relations.

In 2015, Singapore was Malaysia's second largest trading partner globally and largest trading partner among member countries of ASEAN.

Total trade between the two countries was recorded at RM190.6 billion (US$48.8 billion) in 2015. — Bernama

Refer The Edge and the announcement, the replies given are vague. So either he resigns or not, its still a con job. Resign = Con job cuz he was appointed half a year ago, now want to retire? Stay = Why is Management giving such indirect responses? I would suspect they being part of the manipulators

Sold my stake. This seems to me like a con job. Dr Yeoh, joined end-2015, now wana quit due to age? Errr..not like he didnt know he was gonna celebrate 60yo this year. I should've seen this coming - to be fair I questioned in this forum earlier what was his motivation to be a CEO, given his calibre. I am willing to take biz risk, but this seems to be planned. In addition, peeps, pls read The Edge Weekly, Vivo seems to have past precedence of similar exercises (fail to deliver promises -> major SH exit quietly -> share price tanked -> restructure via RTO -> New promises -> fail...)

It pains me to have to read through so much crap. Seriously, can we stop attacking each other and focus on the core discussions - vivocom please? Even if some idiotic guys provoke u, let's just stay cool and ignore them ok? Anyway, many thanks to everyone who has provided their views with analysis/reasoning. Much appreciated.

Finally I can sleep peacefully tonight! Haha... Fingers crossed the downtrend reverses now

newboy, no doubt Dr Yeoh is the key man, but what's his motivations? Being a corporate ceo is too small for him i believe

Actually I have a question that I couldnt get any answers - What is Dr Yeoh's motivation? He doesnt own shares in Vivo. No way he's there just to be CEO (he has his own PM company, he doesnt need to be corporate CEO). Does he own the remaining shares of Neata Aluminium (which wholly owns Vivo construction entity)?

newboy, I believe the private placement was taken up by Creador CEO (instead of the fund itself)

Sorry me newbie still blur blur, what is T5?

Wb is still overvalued - proving the stock is still full with speculators

Thanks ktsk88. Then in this case, isnt WC and WD (Wprice 0.25 + Exercise price 0.1 = 0.35) undervalued relative to WB (Wprice 0.2 + Exercise price 0.24 = 0.44)?

Hi all sifus, newbie here and there's stg I dont understand. Sorry if this is a dumb question. Can the Vivo warrants can be exercised anytime we want (based on my reading of the term sheet, it seems so)? If so, shouldn't the warrant with longer expiry date (i.e. WD) be more valuable? Currently it seems to be that WA is overvalued and WD is under-appreciated (least traded volume). Thanks guys!