Wednesday, November 28, 2012

Why only now selling MAS?

Today, MAS is being thrown into pieces - dropping 15% after it announced a capital restructuring exercise last night. Why only now investors are realizing this? In fact, this exercise was way overdue. See the below balance sheet.
It has more than RM8 billion debt with additional RM1.5 billion in perpetual sukuk. It needs another financial restructuring, that's for sure.

Now look at what it intends to do in shoring up the balance sheet - a 3 for 2 rights issue with assumption of its rights to be issued at RM0.60. In this exercise, it is trying to raise RM3.1 billion from the shareholders.

And the ones that are going to pick up the shares are mainly...Khazanah and EPF.

Why does it need the additional capital fund raising?

Would this exercise revive MAS? It will improve its balance sheet and ability to raise funds for sure, but operationally this has to be addressed to make it a viable airline again. Otherwise, even at this price (which is valuing MAS at RM2.84 billion, RM0.85), it is not worth the money.


Gark said...

Never knew that perpetual sukuk can be counted as equity and thus NAV can be artificially pushed up?

To me (layman) sukuk is bond, albeit a very very long term one and it should be treated as long term obligations (since it is callable).

Nowadays accountants sure know how to cook the books legally like what happen to olam recently. :)

CrabGrill said...

Hi Felicity,

How much would you rate Cheetah? I think it worth around RM 0.50 per share. This company's revenue and profit just doesn't grow over the 3 years. But it is cash rich with very low gearing. Current dividend yield is around 4%. But I am speculating it to have a boost of profit as the cotton price has reduced from its peak in 2011. If EPS in current fiscal year can achieve 11 cents per share (Q1 EPS is 3.1 sen/share), that would mean 3.3 cents dividend per share (dividend policy of 30% payout ratio) or 6.6% dividend yield @ RM 0.50 per share. This dividend forecast back with large chunk of free cash deposit draws my attention.

felicity said...

Cheetah is a very consistent performer. however, the shares have not been moving.

If you look at the business, it is not as vibrant as Padini or Bonia. While, it is cheap, sometimes some companies are best avoided.