TheStar
PETALING JAYA: Foreign funds may be eyeing Malaysian Airline System Bhd's (MAS) shares as the company gears up for record profits for the financial year ending Dec 31.
Shares in MAS surged 78 sen, or 17%, to a month high of RM5.30 yesterday on speculation that foreign funds were buying the stock.
It was the day's second biggest gainer.
Chief executive officer Datuk Idris Jala told Bloomberg via e-mail yesterday that fund managers had shown confidence and expressed interest in MAS after seeing the results of the company's successful turnaround.
A MAS investor relations officer told the news agency the company had held presentations to investors in New York, Hong Kong and London over the past two weeks.
“We believe there is foreign interest in the stock as MAS has just completed a roadshow around the world,” OSK Investment Bank senior analyst Chris Eng told StarBiz.
Investors could also have been drawn to the stock as selling pressure on MAS eased ahead of today's exclusion date for its rights issue.
Eng said MAS had hedged some 60% of its fuel requirements for this year and 18% for 2008.
“Their hedge for 2007 is at West Texas Intermediate US$60 per barrel, which should cushion them from recent high oil prices,” he said.
He added that OSK was maintaining its “buy” call on MAS although the run up in its share price had eroded the potential upside to its fair value.
The stock's bullish performance yesterday was also underpinned by a CIMB Research report, which maintained an “outperform” call on MAS but with an upward revision in target price to RM13 from RM8.40 previously.
CIMB said yield improvements on the underlying seat (excluding surcharges) were expected to play a key role in buffering MAS from higher jet fuel costs.
“Restructuring of yield and inventory management have led to strong enhancements in booking data yields.
“Based on first half 2007 data, MAS claims to have improved yields by 5% to 18% year-on-year across various geographies,” it added.
The brokerage said MAS' ability to pass on surcharges was improving as load factors rose above 75% on increased tourist arrivals and higher sales.
“If it continues to succeed in boosting demand and raising its load factor, MAS will be in a better competitive position to pass on higher fuel costs via revised surcharges,” it said.
It added that the share price catalyst for MAS would be a set of strong second half results.
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