MAS-Double Jeopardy

Luck Changer Wanted

Called it what you may.

Bad luck;  bad fengshui, bad management, karma.

You asked for it, MAS! or whatever.

Losing two wide-bodied jets within 4 months is statistically improbable but it has happened.

What a crying shame.

After playing Russian roulette in the Ukraine, there is again rumour that another MAS flight traversed war-torn Syrian airspace.

Are we pressing our luck too far?

So what now is the strategy for MAS, in the midst of tragedy?

MAS apparently has only two ways to go.

The unpalatable one is to go under bankruptcy which will have a political backlash and unemployment to the loyal employees of MAS.

As  for its senior executives and Board of Directors which should rightly be, they should resign en-bloc before they get the big boots!

The second way is easier on everyone. Khazanah should immediately mount a takeover by taking over the remaining 35% of the shares it does not own.

At today's price of RM 0.205 it amounts to somewhere close to RM 1 billion which is chicken feed for the sovereign fund.

By taking it off the listing on Bursar, it can then take time to privatised it and to do whatever corporate surgery that it wants.

The thing to do is to make sure only those who are meritorious get to helm MAS and to turn it around in double quick time.

Zero Moustafa-Not Quite

A Fictional Fantasy Between the Wars

The Grand Budapest Hotel is superb story-telling.

The way the story is unraveled is artistically done  so that the audience can savour every bit of its incandescent story-line.

It is intrinsically a story of of two lobby boys who became concierges and then owners of the same hotel in two different periods and their experiential adventures. While Gustav H, the senior lobby boy has superb hospitality skills and provided specialised services for  aged wealthy women thus earning their continuing patronage to the hotel, Zero Moustafa was the simpleton refugee that finally inherited the Grand Budapest Hotel. His life, however, lacks the splendour of Gustav H and was a long unending life of tragedy.

The thrills and spills are all here in this comedic thriller. Do see it.

Lending credence to this US-German effort are Ralph Fiennes as Gustav H, F. Murray Abraham as Zero, Adrien Brody as Dmitri,Jeff Goblum as Kovac, Bill Murray, Saoirse Ronan  as Agatha and Tilda Swinton as Madame D.

MAS-Looking for the Golden Key to Unlock Assets

A No Hope Situation for MAS?

This is the Malaysian Insider report of the AGM  of MAS held today.

"Stung by criticism, nine non-executive directors of Malaysia Airlines (MAS) today decided unanimously to return the fees paid to them last year, amounting to RM396,000.

MAS chairman Tan Sri Md Nor Yusof told a press conference that the non-executive board members had agreed to return the money to the airline.

It had been previously reported that many high-ranking civil servants were also sitting on the boards of government-linked companies.

The Malaysian Reserve had reported that Putrajaya was looking to ensure that active civil servants did not become board members of GLCs.

Performance and Management Delivery Unit (Pemandu) chief Datuk Seri Idris Jala had reportedly said civil servants sitting as GLC board members faced potential conflicts of interest.

MAS board member Tan Sri Irwan Serigar Abdullah is also Treasury secretary-general and chairman of Cyberview Sdn Bhd, the master developer of Cyberjaya.

Md Nor also said that there had been calls from shareholders for the immediate resignation of the board and MAS management.

"It is only natural for the shareholders to be angry considering how events have unfolded.

"However, we have tried to explain to the shareholders that MAS has been facing chronic difficulties over the past 15 years,"  he said.

Meanwhile, MAS group chief executive officer Ahmad Jauhari Yahya refused to confirm or deny that filing for bankruptcy or retrenching staff were among the possibilities they were exploring.

He refused to answer questions, saying that the airline was looking at all options.

"We are looking at all options, I am not going to answer 'yes' or 'no'," he said at a press conference when asked whether MAS was mulling bankruptcy.

The press conference, at the MAS training centre in Kelana Jaya, was held shortly after the end of the annual general meeting.

The media were not allowed to attend the annual general meeting but it was understood to be a fiery affair due to MAS's balance sheet.

Md Nor said the impact of missing Malaysia Airlines flight MH370 had been widely disseminated by the media, both local and international.

"We have reached a critical point in our efforts to return Malaysia Airlines back to a stable footing," he admitted.

"The loss of MH370 means that MAS also has to grapple with perception and a loss of confidence in the airline.

"Although unjustified, we are determined to rebuild the brand," Md Nor said, adding that 2013 was not a good year for the airline.

But he was confident that all was not lost, saying MAS, like the national flag and the hibiscus flower, was a national icon.

"We are Malaysia's embassy on wings, as we carry the nation's name every single time one of our flights is in the air," he said.

"These are factors which must be taken into consideration," he told the press conference.

Ahmad Jauhari said despite its appalling balance sheet, Malaysia Airlines still had strong assets.

"We have a world class engineering team, we have award-winning crew, a very young fleet," he said, adding these were all genuine tangible factors.

Ahmad Jauhari said they were looking at putting more seats on the existing Boeing 777 fleet, or densing up in aviation parlance.

"Studies have shown that we will be able to recoup the costs within six months," he said, adding it would boost the balance sheet.

Ahmad Jauhari had earlier told the media that MAS was looking to retire its entire fleet of Boeing 777 aircraft within a three-year period.

However, he said as MAS was able to recoup the cost of adding more seats to the Boeing 777 aircraft within three months, they would proceed with that initiative. – June 25, 2014."

A Bashing Time at the MAS AGM

MAS's CEO Ahmad Jauhari - Biting the Bullet!

Tumultuous is the word here to describe the MAS AGM held today.

The minority shareholders really showed their temper at the Board of Directors who were 100% in defensive mood; admitting inefficiency and a poor performance irrespective of the MH 370 tragedy.

While the Chairman noted the anger of the shareholders, the latter retorted they were more sad than angry at the continuing saga of the poor financial performance of the airline and its share price.

As the investment banks' negative appraisal of the stock continue to force the price down, Khazanah's untimely statement that they will be reviewing MAS's position in a time-frame of 6 to 12 months only, was badly-timed and a real bummer.

Comments like the whole board should be summarily dismissed;that they should only be paid RM 1 allowance only as well as fixing KPI's on all of them were part of the biting rantings.

Kinibiz has this to report.

The MAS annual general meeting (AGM) was extended by two hours today after a poll vote was called to decide on a resolution concerning directors’ fees.

On chairperson Md Nor Yusof’s insistence, voting was switched from a show of hands to a poll vote. Under a poll vote, shareholders’ votes are counted based on the number of shares held.

The resolution to “approve payment of directors’ fees amounting​ to RM396,000 per annum for the financial year ended December 2013” eventually passed with 79 minority shareholders voting for the resolution and 70 against. Those going against represented 0.07% of all shares held.

However, in an unexpected development, non-executive directors  chose not to accept the directors’ fees after conceding that the board’s performance during 2013 was poor.

Shareholders had earlier expressed deep dissatisfaction, going as far as to call for top management to resign.

The AGM ended at close to 3 pm.

There was certainly a leaf of experience to be learnt from this meeting for all Board members in general .

It's not all ice-cream and cherry pie helming a public listed company that cannot perform!

Foreign Fund Managers Pursue Aeon

The Ubiquitous Aeon Sign

To best the competition, Aeon Co (M) Bhd will now diversify into electronic and furniture stores.

Aeon Malaysia formed a joint venture with Thailand’s furniture retailer Index Living Mall Co in September to set up shops in Malaysia

Aeon's focus thus far is on enlarging its domestic operations through shopping centers, department stores and pharmacies in the country.

According to Aeon, this strategic move is driven by competition in the retail industry and changing consumer behaviour. According to its spokesman, there is an ample increase in retail space in 2013 and it’s going to increase further in the next two or three years. 

Aeon’s competition in Malaysia includes Tesco Plc, the UK’s largest grocer.

Retailers in the Southeast Asian nation are seeking new ways to lure customers as price increases on fuel, power and sugar slow private consumption. Aeon Malaysia plans to spend RM 1.4 billion (US$435 million) this year and next to open more stores and refurbish existing ones as it prepares for a goods and services tax that it says may hurt sales for three months after implementation in April.

Private-sector consumption expanded 7.1 per cent in the first quarter from a year earlier, after climbing 7.4 per cent in the last three months of 2013, according to BNM data. 

“Aeon Malaysia has been one of our core holdings for the past 15 years,” said Gerald Ambrose, managing director of Aberdeen Asset Management Sdn Bhd, which owns shares in the stock. “The company does seem to have the ability to grow their business.”

Shares of Kuala Lumpur-based Aeon rose 1.9 per cent at 11.52 am local time, extending gains for a seventh day. The stock is headed for its highest close since June 4, 2013. It earlier surged as much as 4.6 per cent. Stock purchases on Aeon were mainly from foreign funds.

Aeon shares went down to a low of RM 3.69 after it ex-all and found sustainable traction recently above RM 3.80. It has been advancing ever since due to new fund  interests. 

The ex-all theoretical  price was RM 3.75 . At today's price of RM 4.23, a shareholder of 4000 shares ex, would have made a clean profit of  RM  1,6,92 if he sells. 

If Aeon shares are chased upwards to RM 5 in the next few weeks, then our shareholder would have gained RM 5,000;an equivalent return of 33% within 60 days.

Powering On Through ITC As Well?

After investing more than two billion ringgit in building up the 4G infrastructure, product development and network, YTL Communications(YTLC) expects to incur only a limited capex when it rolls out its Long Term Evolution (LTE) technology soon.

According to its CEO, Wing K Lee, the current 4G WiMAX network has been  'future-proofed' as they have built a flat IP network enabling any IP-based technology to just plug in.

He said the company will not be abandoning its WiMax service which it has adopted since November 2010 to roll out its LTE technology. "No, we will not be migrating away from WiMax. Instead we will work hand-in-hand with LTE," he said.

Wing said YTLC's 4G network which covers 85% of the population with over 4,000 base stations, has proven to be robust and will continue to serve its customers well.

He added further that while the mobile WiMAX network has delivered favourable economics, adding LTE to its network would allow for an expanded array of device and service possibilities.

YTLC has completed trial runs and will be rolling out its LTE soon, without giving a definitive date.

Howevert, Wing was reluctant to reveal which LTE variant YTLC is planning to adopt except to say it is
a "newer version".

Wing had previously said that he liked the Time-division-LTE (TD-LTE) spectrum as it is more flexible and efficient compared to Frequency Division Duplex (FDD) spectrum, which is a different standard of LTE 4G technology.

He said the latest version offers faster speed, higher network capacity and at the same time present better quality of Internet multimedia experience.

Wing assured that  YTLC should be in a good position to be the first company in Malaysia to launch the newer version of LTE.

"We are looking for the right time and point of entry to launch the new version of LTE," he said.

YTLC will collaborate with Asiaspace Broadband Sdn Bhd's 30MHz allocation on the 2.3GHz band in infrastructure and spectrum sharing.

This collaboration will help avoid duplicity of infrastructure and maximise the use of bandwidth for the wireless broadband services nationwide by both companies to provide quality and uninterrupted services.

YTLC was among the eight companies awarded the LTE spectrum in late 2012. The other companies include Celcom Axiata Bhd, DiGi.Com Bhd, Maxis Bhd, Packet One Networks (Malaysia) Sdn Bhd, Puncak Semangat Sdn Bhd, REDtone International Bhd and U Mobile Sdn Bhd.

Celcom Axiata, Maxis, DiGi and U Mobile were more aggressive in their LTE rollout. Celcom said it plans to have more than 2,000 LTE sites, while DiGi expressed its plans to have more than 1,500 LTE sites by end of this year. Maxis, which has set aside RM1.1 billion of capital expenditure (capex) this year, said it will spend a significant amount of this capex to expand its LTE coverage.

On another note, Wing said YTLC will be launching the 1BestariNet project in Sarawak this year.

So far, 90% of 10,101 primary and secondary government schools in Malaysia are connected through the cloud-based virtual learning.

So, it looks like YTL Power International may get more cash in its pocket through the advent of YTLC's LTE technologies when they are implemented.

Perhaps, it is time to collect some more YTL Power shares?

AFFIN Bank-To Buy or Not To Buy its Rights

If you look at the price level of Affin Bank, you will notice that there is a huge price fall from its peak of RM 4.15 sometime in early February 2014. After moving in an erratic manner in February, it plunged to below RM 3.85 at the end of March. This represents a fall of 30 sen or  a serious 7.2%. In much of April, it found no traction and slipped yet to another low at RM 3.75 or another 10 sen fall, bringing the percentage loss to a loss of 9.6%.

Falling Price

By mid-May, the price of Affin has gone down to RM 3.65 and in early June, it just about straddled the RM 3.60 price level. At RM 3.60, Affin's percentage loss was 55 sen or a 13.3%. By the second week of June, it moved up slightly to RM 3.62 and RM 3.63.

Let us look at some of the reasons by the gravitational  pressure on this stock.

Investor confidence on the stock was dampened by the huge rights issue which will dilute market price when the new issue is listed. There are concerns that optimal values will not come on steam until 2017. TA Investment Bank (IB) has re-assessed the stock downwards putting it at RM 4.17 at its Top Price (TP) while Alliance IB stayed neutral with its TP at RM 4.25.

As these assessments were done two months ago,they may no longer hold true as even now the price of Affin has slumped down by another 20 sen to RM 3.63 since then (RM 3.85).

 Let's look at the rights issue.

It is now confirmed that for every 10 shares held on 12 June 2014, shareholders will get 3 rights issue at RM 2.76. That would mean a person with 1000 shares will only get 300 new shares. He will need to pay RM 828.

If the price is maintained at RM 3.65, then he may want to subscribe for an access amount of 700 shares. If he does so, then he would be paying RM 2,760 (RM 1,932 + 828= RM 2,760).

Given the dilution with another 30% new shares coming onto the market, there is  possibly a price shaving to be anticipated. It could cause the price to fell by another 30 sen.

This could mean a ex-price of  about RM 3.10-RM 3.20.

More than that could be a bonus.

PS: Ex-rights trading price of Affin today is RM 3.44.

If the price holds accordingly, after the OR has been traded then this could possibly be a benchmark for Affin ex-rights. It also represents a good opportunity for the OR to sell at a good price.

At the price of  RM 3.44 given the rights at RM 2.76, this could mean a ball-park gain of  0. 68 sen per share.