He who has the history of bankrupting and DE-listing a private corporate company – Malakoff Corporation Berhad; who successfully and viciously terminated thousands of workers during his tenure with Malakoff Corporation Berhad; and he who had declared for Malaysia Airlines the first massive losses of RM2.52 billion during the share swap and collaboration framework with Air Asia.
WE believe MAS present CEO is either incompetent or intentionally collaborating with Tony Fernandez of Air Asia to save Air Asia from bankruptcy at the expense of Malaysia Airlines by giving away MAS routes to Air Asia terminating Johannesburg that generated 80% of revenue for Malaysia Airlines; Dubai that generated almost 95% of revenue for Malaysia Airlines and Haneda that merely started to generate revenue for Malaysia Airlines. He fails in his fiduciary duty recovering the loss of MAS routes from Air Asia. The longer he sits as MAS CEO position; the more routes will be lost to Air Asia through his plannings. His claims were those routes were not profitable and bleed MAS to dry and by contrast he has granted Air Asia many opportunities to open new routes into those routes MAS had lost under the corporate leadership of Ahmad Jauhari – a.k.a. The Clueless CEO. The truth is Ahmad Jauhari secretly approved the giving away of Johannesburg, Dubai, Haneda and Taipei for Air Asia.
Ahmad Jauhari has been lying to his workers of the performance of Malaysia Airlines and we caught his evil collaboration with Tony Fernandez and proxies i.e. Azahari Dahlan and Zahrah Zaid for fixing up the workers from the inside of Malaysia Airlines.
Let us brief the public the ingredients to destroy Malaysia Airlines by Tony Fernandez’s proxies;
- Ahmad Jauhari’s special skill is to shrink the operation; DE-listing the corporation like what he did to Malakoff Corporation Berhad and planting more corporate espionage of Air Asia into Malaysia Airlines establishing the platform of insecurity for the workers. His plans were to DE-list Malaysia Airlines and possibly bankrupt it at one ringgit value for Tony Fernandez to buy over. His best performance is playing PRETENTIOUS GAME with MAS workers seemingly portray a good man with vision to save Malaysia Airlines. Time for Ahmad Jauhari to tender his resignation as soon as possible or face the invincible wrath – FIRED and HUMILIATED.
- Azahari Dahlan will work on recruiting Air Asia’s loyal workers into Malaysia Airlines Aerospace Engineering with intention to sabotage Malaysia Airlines’ aircraft where he successfully responsible for engines on fire and emergency landing. His further mission is to ensure Air Asia’s aircraft could be serviced for FREE on the house when Air Asia sends all of its Airbus aircraft for major overhaul maintenance this coming August 2013. The last head of division in MAE had responsibly asked for CASH TRANSACTION from Tony Fernandez; was terminated by Ahmad Jauhari.
- Zahrah Zaid’s mission is to crush the workers’ rights and fixing the workers for fast termination. She is to break up all MAS unions and associations before her contract ends with MAS. Whilst she sat as the director for MAS Human Resource Division; she quickly fixed the remuneration for the top management using the budget that was meant for the workers and today she had her salary hiked up 150% from RM40,000 right up to RM100,000. Read here for more information on Zahrah Zaid’s infamous history.
The TRIO have planned well for fixing all the workers using their available sources, relatives and connection. Especially Ahmad Jauhari – he has a relative working as Deputy Director of Anti-Corruption Agency to frame up those who were against the collaboration with Air Asia with the help from NUFAM, NUFEM (that is yet to be formed) and NUFOAM (that is under way to be formed).
Tony Fernandez desperately wanted Malaysia Airlines more than any other businesses. He sees MAS as a very SEXY LADY and wishes to re-marry MAS through the Malaysian tycoon – Syed Mokthar Al-Bukhari buying over Malaysia Airlines. Syed Mokthar Al-Bukhari does not have the expertise to run Malaysia Airlines and we believe he is being used by Tony Fernandez to purchase Malaysia Airlines from the ladies in RED.
However, in this Episode 2; you will learn the comparison on the performance between Malaysia Airlines and Air Asia where Malaysia Airlines’ shares is expected to rise up to RM8.50 than of Air Asia’s shares which has more limitation in ratio of profit to value and cash return on investment.
MORGAN & STANLEY analyzed on prospective F2008 P/BV, both MAS and Air Asia are trading at undemanding multiples of 1.2-1.3x, comparable to the Tier-1 airlines multiple of 1.3x. We do not look at P/E multiple as Air Asia’s earnings are boosted by deferred income tax credit, and contribute to the low artificial P/E multiple.
Investment Conclusions. Morgan and Stanley conclude with three investment observations.
- Closing the Efficiency Gap. We believe MAS has successfully restructured its business model and has a new business transformation plan to grow operating revenues. By focusing on delivering value to passengers and cargo/MRO customers and taking out non-essential costs, MAS is building a lean cost structure to compete more effectively with low-cost airlines and the regional network airlines. Air Asia, which viewed MAS as a non competitive threat in the past because of its gross operational inefficiency, is now re-defining its product to create added-value services to compete with MAS. The net impact is the operational efficiency gap between the two airlines has narrowed significantly over the past two years, as highlighted by the operating and pretax margin trends (see Exhibit 2).
- Sharp Divergence in Cash Position. MAS raised its cash reserve through a rights and loan stock issue last year and had accumulated a cash position of RM5.3 billion at December 2007. In a very tight liquidity credit market, MAS had net cash of RM4.4 billion while Air Asia had net debt of RM3.3 billion at December 2007. As funding costs start to rise with increasing credit default risk, we think Air Asia’s plans to seek to fund its aggressive capital expenditures of RM2-3 billion for the next five years might encounter difficulties in a tough credit market. In F2008, we estimate Air Asia would need to raise about RM3 billion to fund the estimated capital expenditure of RM2.8-3.0 billion, whereas we estimate MAS’ capital expenditure would not be more than RM1.0 billion.
- Potential Derivative Losses. We are particularly concerned about Air Asia’s fuel hedging position. We view the directional bet on oil positions via its sold call options – currently exposed on its F2009 and F2010 oil positions – as potential derivative losses that could severely undermine the company’s cash flow to service both the interest and fixed contractual payments. If WTI oil prices remain above US$90/bbl for the next two years, the underlying operational losses, and more importantly, reduced cash flow generation for Air Asia could have a substantial impact on its franchise value. In contrast, MAS has adopted a conservative fuel hedging strategy whereby it will benchmark its hedging ratio to the average hedging ratio of the Asian airlines to reduce oil volatility.
On a risk-reward tradeoff for the Malaysian aviation sector, we believe MAS shares offer much better risk-adjusted upside potential than Air Asia shares, and we recommend investors switch from Air Asia to MAS. Given MAS’ franchise value of less than 1.0x EBITDA, we believe MAS is attractively valued for deep-value investors.
Buy MALAYSIA AIRLINES And Sell Air Asia
Morgan Stanley research on Air Asia
- Tough corporate restructuring builds a strong platform for MAS to compete effectively with the top airlines in Asia.
- Active yield management drives up operating revenues and enhances operating margin.
- Falling oil prices boost near-term earnings and contribute to positive earnings surprises.
Key Value Drivers
- Network rationalization enhances operational efficiency and load factors.
- Focus on profitable routes and maximize yield to enhance value for shareholders.
- Surplus cash reinvested for earnings growth to enhance shareholder value.
- Yield surprise. Higher fares achieved despite lowering fuel surcharges due to active yield management.
- Positive earnings surprise could arise from Airbus compensation, falling oil prices, or higher yields.
- Jet fuel prices below US$95/bbl would lower MAS’ operating costs to 31% vs. 34% currently, and substantially improve net earnings.
- Slower global GDP growth. If US and global economies slow significantly, the weak global travel outlook would be negative for the carrier.
- Threat of low-cost airlines. If LCCs aggressively lower fares to increase market share, MAS and other airlines would likely cut their own fares to protect leisure passenger segments.
- Strong competition from Gulf carriers. Gulf carriers are expanding their fleets aggressively to take advantage of open skies in Asia. Long-haul routes at risk for MAS.
- Low-cost airlines (LCCs) in Asia have the potential to increase passengers at a CAGR of at least 20% for the next five years, by our estimates.
- Air Asia has the first-mover advantage in the LCC industry, and the carrier has built a proven and successful LCC business model in Asia.
- If WTI crude oil prices stay above US$90/bbl in 2009 and 2010, Air Asia would be exposed to substantial derivative fuel contract losses and lack of cover for the high jet fuel prices, and this could lead to negative earnings surprises.
Key Value Drivers
- Factors driving the high LCC growth are liberalization of ASEAN and Asian skies, doubling of aircraft orders by Asian LCCs in four years, and low market penetration by LCCs in the Asia/Pacific market.
- High operating earnings CAGR supports high EV/EBITDA, and is a key support for Air Asia’s share price, in our view.
- Fast track in ASEAN aviation liberalization.
If ASEAN skies are liberalized ahead of the 2008 deadline, we see additional regional cities as an upside option for the carrier.
- Network route rationalization.
We see significant incremental growth potential from the domestic and international routes, particularly from capacity expansion to India and China, two of the fastest-growth aviation markets in the world.
Key Downside Risks
- Restructured and recharged Malaysia Airlines (MAS).
We think the revamped national carrier could prove to be a formidable competitor to Air Asia. Impact of high fuel surcharges on underlying fares. The higher ticket fares, which incorporate the increased fuel surcharges, could have negative implications for passenger travel.
- Inflated equity.
We think net equity for Air Asia was inflated by 30% at June 2007, and possibly by about 35-40% for the next 2-3 years, due to mounting deferred tax credits and deferred associate losses on the balance sheet.
Malaysiaairlinesfamilies will continue to expose Ahmad Jauhari’s illegal activities inside Malaysia Airlines – so Ahmad Jauhari better equip with battalion or leave before your are fired and arrested. You shall continuously declaring profits for Malaysia Airlines and promoting MAS shares transparently.
Stay tuned for more updates on Tony Fernandez is making a comeback to Malaysia Airlines using MAS gullible workers and the billionaire tycoon.