MAS move fails to excite analysts

MALAYSIA Airline's (MAS) (3786) move to scrap its fuel surcharge on domestic tickets yesterday failed to excite analysts with most retaining ratings on its shares.

HWANGDBS Vickers Research Sdn Bhd said it does not expect MAS' domestic load factor to pick up considerably, given intense competition from low-cost carriers, mainly AirAsia Bhd, in the domestic market and the expected shift in consumer preference to cheaper flights amid an economic slowdown.

It is maintaining its "fully valued" on MAS, with a RM2 price target.

OSK Research Sdn Bhd analyst Ng Sem Guan said he is not surprised with MAS' move to drop the fuel surcharge given that its peer, AirAsia, had done so last November.
"With the company having introduced the 'All-Inclusive Low Fares' campaign, the latest development is just another publicity stunt to grab passengers' attention given the intense competition," he wrote in a note to clients yesterday.

He is reiterating his "neutral" rating on MAS with a price target of RM3, as he sees the removal of fuel surcharge having little impact on the company's bottom line estimates.

Ng has forecast MAS' profit and revenue to be lower by 38 per cent and 7.1 per cent respectively in the fiscal year ending December 31 2009 from a year ago.

"While we are delighted with the efforts taken by management to ride through the competition, the bleak outlook for the aviation sector and the general economy remains our utmost concern.

"However, we believe that the company may continue to be on investors' radar screens given its impressive management track record and the swirling rumours which surfaced last month of a potential strategic alliance with Qantas," he added.