Hello forumers,

I just open this topic for 24 hours....Hehehe....

After that moderator can remove already....This is purely a speculative topic and rumour. But then again, MAS counter already suspended so cannot buy and sell tomorrow.

So why do you think it is suspended?

I fishing for information.

i entered forum to post on this and saw this thread already....
yeah man why? is it because of the code share with turkish airline.





This post has been edited by aeronic: Jun 11 2009, 06:26 PM

Maybe they've got some truly horrid results to announce ('cos of their hedging losses?) and don't want the shares to tank before Monday....

Haha... maybe... but one time pain better than pain every 3 months

Not bcos of copde share....code share is business opportunity so it shud be making money....unless TURKISH AIRLINES is buying Mas shares...may be becos they still cannot submit their Annual Report which has been delayed ..May be MAS cannot give the reason to SC for the further delay..the first delay was due to MAS adhering to FRS...just my opinion

I heard MAS is going to announce bad quaterly result. So suspension is to prevent share price drop.

http://www.themalaysianinsider.com/index.p...top-rm2-billion

Yeah, some meeting is going on today. And yeah, they are going to declare the profit/loss.

This post has been edited by koopa: Jun 12 2009, 12:01 PM

does anyone know when will they declare the quarter result ? very excited to see the report

hmm suspend stock to avoid share lost..how long they can suspend..duh

why MAS's management so poor.... zzzz

guess who's the recently appointed advisor to MAS ?

Suppose to be today.

And yeah the advisor is Badawi

thats what happens when one puts a "sie mau" (dead cat) in place to look after all the tikus.

siang pagi masuk opis tidur, malam tangkap ayam.

i think their report is out...

their secretary resigned..

btw.. im not too good at reading financial reports.. is the loss 6billion ??

So there we have it....Thanks to everyone for contribution.

MAS reported loss of 41sen per share. There is a drop in their NTA from 2.5 to (0.27) meaning to say they are owing folks money.

Nope, the loss is not 6 Billion. It is RM694million. Here is the report.


Attached File(s)
 MASQ1.pdf ( 80.94k ) Number of downloads: 42

hmm new TP is?

haha sorry sorry.. 694m.. thanks for correcting me

profit?

i think there is some mistake at bursa website... take a look into actual report..

star say profit..

No, loss RM695m after tax.
Operating goes into red. And those derivatives not closed all yet...

This post has been edited by htt: Jun 12 2009, 06:54 PM

latest update 06/12/09 1051 GMT
15 mins ago

---

Added on June 12, 2009, 7:20 pmsuspend lah, i will queue to buy at rock bottom ammount

This post has been edited by aeronic: Jun 12 2009, 07:20 PM

Next Monday share sure drop a lot. Anyone plan to buy ?

buy buy .... but mas like never rebound one since last time le

even if the price crashes.. i dont know how long it would take to rebound...
and i dont plan to keep MAS for long term..

mas also FBM30 ... why so lousy har....

Why they suspend this MAS today. Suspend one week la. Else next monday also will drop like hell.

Take note. After drop. Sapu.

are MAS drop hav direct effect to airport? buy at 3.54 this morning, but at 4.45pm it going up like hell to 3.66!
try next monday to upload.

MAS already bailed out 2 times!. Now having negative shreholders' fund and fall into PN17. LoL.. malaysia GLC boleh!!



Look SIA.. 10x market cap more than our bolehland MAS.

That is my worry also. Not sure buy or not. If buy, how long for it to go back to RM3.

Think like this Air Asia going to overtake MAS one day...

hm... MAS lowest price in a year ago at 2.4 something .. thinking to buy if drop to 2.4 ~ 2.6

Heck no

But then again, I think it's unfair to be overly critical of MAS management, espcially with Idris Jala helming the company.

He's brought so much improvement than the previous CEO, and he's made many good moves to turn around the company.

MAS is indeed in the right track with Idris Jala at helm, even though the appointment of Mr. Tidur Time Meeting may cast doubt to the sceptics.

This post has been edited by nujikabane: Jun 12 2009, 11:34 PM

Technically MAS is a PN17 company now, and have risk of delisting.

But wait, KLSE has waiver on MAS under some conditions

Quoted from KLSE's MAS announcement.

Haha...I leave after work and find MAS is nearly kena PN-17 since the company become Net Tangible Liability (NTL). They managed to get a waiver and not put on PN-17 - somehow someone managed to get this waiver.

Actually, lots of airlines hedge against fuel price increase, but I think last year most, if not all, bet the wrong way and recorded losses due to fuel price drop.

The waiver takes into account that the reason it became NTL is due to hedging wrong way, NOT because MAS management failed to properly execute the MAS operations.

In fact, I bought MAS at 2.6 because I have faith that Idris Jala will turnaround the company, and not because it is a GLC. Based on the recovery from 2007, Idris Jala has shown he is capable to turnaround a loss company to profit, taking hard steps where needed. I believe that at the end of 2009, this company will already turn around and later the MTM losses will be history.

Hehe...Just my 2 cents.

I agree. I think 2.4 is a good price to enter but you may need to hold it for long term.

if really become pn17?? jia lat la...

No doubt about Idris Jala reputation and credibility which show good and excellent track record.

Operation wise, MAS still suffer 100+ million losses, hedging losses 500+ millions. Operational wise still in red, but to be fair, every airliner also suffering in this period of time.

Turn around, it depended on economy condition and oil price then, if condition is not favourable like due to prolonged economy recession, flu become severe etc or fuel cost sky-rocketing, he is powerless to do anything as well.

MAS has poor history on hedging the fuel cost.
Last time, when oil price starting to surge, MAS has little hedge, so suffer the high fuel cost.
After oil price surge to USD100, start to hedge a lot, now suffering.

The answer is not yet due to waiver.

Actually this move makes the first step and show how other can apply for waiver.

VyvernS, you look confident in MAS that able to do a magical turnaround by 31/12/09

make a note. MAS closed at 3.26

i'm sure there will be a lot of fearing dumping on monday.

dont catch the falling dagger, guys.

Negative equity means investors are paying 3.xx into a company that has nothing in their book but only liability aka in layman term, company has loss all of its asset and capital already previously. If company cannot turn into profit, basically there is nothing left in the company.

So for those paying 3.xx share price on it basically is paying the price on the expectation of the company to make xxx millions in the coming few years.

But the hedging loss is not yet fully realised if not mistaken.
But it has been realised, it will trigger the PN17 violation.

huh... worst worst worst ...

Hi hi Pana.....Yup, confident. I don't think Idris Jala will let his efforts go to waste. He is the right guy at the wrong time....

He has managed to turn around this company. Unfortunately due to rising oil prices and H1N1, somethings just did not go right.

All readers, this is all my 2cents and humble opinion. I already hold MAS shares. All those reading this, please be careful. Do your own research before buying in. There is a risk with MAS, because if any of the waiver conditions are violated, MAS will join Talam & Ekran in PN17..

And there are lots of uncertainty in the airlines industry (Airbus investigation in progress), travel industry (H1N1 virus), commodities industry (increase in fuel costs) and stiff competition from Datuk Tony.

And I still gung-ho holding on the shares....

wont let Mas Bankrup gua...

MAS should still survive if the oil price hike...
But even if government strip off all their debts & left them with cash & they still left with negative equity after a few years, I just wonder shall government do it again?

what to worry, mas still got big boss behind it.
it's ridiculous cuz WE the tax payer is the boss!!

Assign new CEO lah, of coz

After a few years, if MAS keep getting into hot water, then: "Announcing the new MAS CEO, - "Tan Sri" Datuk Tony Fernandez!

government will do tat gua.. zzz

Capital Injection
Method 1 - Use Khazanah Sukuk bond investor money
Method 2 - Use EPF people money

Honestly, do we really want the govt to bail out MAS?

Why do we need the govt to be in the airline business? What's the purpose?

They should not have nationalise MAS.. now it is like a pet project, same like Proton.
Continue to suck and drain the tax payers money.

The govt can provide a one time help.. but that's it. It needs to walk on its own.
No more bail out! If it fails, it fails!

Let other Airlines take over, give those lucrative routes to AirAsia instead since
they're doing a wonderful job of expanding and minimize cost for everyone.

No! No!! No!!!, EPF already invested too much in MAS , die die also must save MAS
if god willing EPF will recover all the money next year

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Added on June 14, 2009, 10:57 amThis post has been edited by Kinitos: Jun 14 2009, 10:57 AM

most of the losses in this quarter are unrealized. If the fuel prices keep going up, in the next few quarters, you will see MAS announcing profit after amazing profit. Coz they already write it all down this quarter.

MAS announcing profits this year end? If they look down, they can't see their toes now.. how to look beyond 6 months?

Goodness.. they locked in the fuel price at US$100 barrel for this year, and $95 barrel for next year.

Look, I don't think we'll cross $100 dollar barrel this year.. at most, most likely $80-$90 because the economy
really hasn't recover and higher, people will continue to cut back. Discretionary travel automatically get cut, this is
especially true for business.

The Opec cartels are already happy if Oil can reach $75 barrel and they don't want to dampen economy recovery too.
They'll increase production immediately way before Oil gets back to $100.

The bet on the street is they'll burn through all the remaining RM3 billion cash and they'll ask the govt for bail out money.
The CEO will be replaced!

MAS can always sell the 6 billion $100 fuel hedge to Petronas owned by Khazanah
and again buy another 20 billion more $60 forward crude oil and jet fuel derivatives from Goldman gang, second time won't kena tipu again wah...

If they've written down the losses of the Hedge at $70, wouldn't they be able to say Profit the next quarter, if the fuel hits $80? It doesn't have to go up to $100, just higher than the number they wrote down the loss at. Right?

I'm not saying this in support of MAS, in fact i think MAS is a pretty good airline, but is a shitty company and a shitty counter.

This post has been edited by elhh82: Jun 14 2009, 11:59 AM

Folks,

1) With so many profitable industry around selling at bargain price, why are you investing in money losing industry like airline??

2) Now, what makes you think MAS can be profitable?? It is NOT the best managed company. And, it is in a money losing industry.

Do not fall in love with any counter. Your goal as an investor is to make money.

Dreamer

It has got to do with the myriad of complex accounting standards,
i.e FRS and IAS blabla ..

The accounting standards require companies to disclose possible liabilities, circumstances that may cause the company to not being able to be going concern in the next 12months .

And the standards require that NO unrealised profit be shown in the financial statements, however probable the profit may become realised in the near future.

As in the case of MAS, they posted loss because of UNREALISED (sorry for the CAPS, need to emphasise the point) oil hedging, and not because of mismanagement of the Board of Directors.

The oil hedging can always flip and suddenly wallah,
the company is the black .

Well it is so much easy to simply criticize others when things don't go well, no ? Idris Jala took over the company when MAS was in a shamble, like hidup tamau, mati segan like dat.

He's doing his best to turnaround the company, made hard decisions when he is required.

I doubt the company's in a better position if the old management is still entrusted to manage MAS.

And airline services is much more complex than one might think. And not to belittle Datuk Tony, but if may have problems handling MAS if he is given the task to do so. Yes, he's done good job in AirAsia, but with MAS, it's a different ball game.

That's from P&L view.
On cash flow side, since the forward contract are still in force, MAS is still liable to take and pay for delivery of contractual quantities of fuel at prices above current market.

Unless MAS choose to default on those contracts. Then all traders will be complaining "Janji orang malaysia langsung tak boleh harap"

Ya, we should instead award the MAS management for 3 b possible hedging loss , the highest ever suffered by a listed co.

You mean Financial and Risk Management are not part of their duties of the Directors ? Not possible to cut loss like AA ?

And the question of solvency at stake ? No going concern problem bocs we can print any amount of RM like the US ?

Whose money is involved ?

This post has been edited by SKY 1809: Jun 14 2009, 06:56 PM

LOL didn't mean that we have to give awards to MAS BOD.
Yes, indeed they were making some bad decisions. However, i believe that they came up with that decisions after they've done enough research & analysis. And if the decisions turn out bad, part of it is pure bad luck.

Nobody can predict the future, can we ?

To a certain extent, they can't cut losses like AA . They are in a more wider routes and a more complex rules and regulations entered with various parties.

And currently, apart from the POSSIBLE hedging losses, they are able to to enter into new contracts that will bring in more income to the company.

They have agreed to code share with Turkish airlines and they're mulling many other ways to help the company's cashflows.

Have they ask for bailouts ? And if we are determine to see MAS at par with SIA, shouldn't we be supporting them ? We were ashamed that SIA's market caps is 10x higher than MAS, but if we travel, doesn't AA and other airlines our preferred airlines ?

There will not be solvency problems, because the income generated, even during the current economic conditions can sustain MAS operations.

I do believe that once the economy recovers, MAS position will be better.

I do believe that MAS is not the best airline company around, but I really think that they have done so much better under the leadership of Idris Jala.

And the problems faced by MAS is not isolated, there are many more airlines having financial difficulties, due to the economic conditions.

Whether MAS needs bailout or not is depended on the solvency aka cashflow position.

MAS is doing wrong decision at both time

When oil price was low, no hedge at all. So suffer the high fuel cost when oil price surged. So make loss

So after that start to hedge at 100, then oil price plummeting, so suffering the hedge loss. So again make loss.

If the company is always running at hedge one, the company benefit from the hedge previously when oil price surged.
Or
if the company is always running at no hedge or little hedge, then at least now getting the benefit of low oil price.

Aka you have at least one + and one - from your consistent or proper strategy.
Not double -ve as they are facing now.

The situation just suggested the company has no proper set of hedging strategy. Just like ordinary people when seeing share up time, go to chase, while when seeing share down time, don't want to buy. So always ended loss.

Don't get me wrong.
I am not blaming the company management currently as Idris Jala is newly appointed and couldn't do much about previous loss suffering. But what they need to do is have a full set of proper hedging position be it right or wrong for the outcome of the oil price.

Indeed you are correct.

I am a bit perplexed that people are so easy in criticizing when there is nothing much that can be done, especially in the case of new management running the business, taking over from the old management who have turned the company into such shamble.

They do need better hedging strategy, and I hope they've learnt their lesson.

They could have also done mistake in determining when the economy will recover, thus the hedging loss. Then again, future is for everyone to guess, and they've guessed wrongly.

Hm if MAS decided not to implement the new FRS139, then the public wouldn't know abt it after all, wouldn't they? The implementation of FRS139 is only mandatory starting January 2010, and yet they've chose to disclose it earlier so that the public are better informed. But then again, maybe it is a bad move after all, because if not then we wouldn't even have this thread

So let us all hope that there won't be any bailouts from the Govt, and that this mistake won't happen again.

Can you suggest a good strategy to hedge 12 - 48 months ahead as in MAS case.
Note:It's MAS policy to hedge 80% of fuel requirement.


"The CEO will be replaced!"

We proposed Ahmad Badahwi can?

My suggestion is employ me as the CEO
RM20k amonth +0.1%share option

The best thing to do for MAS is to review its fuel contract and see if it can get out.
Don't hedge for now. They are not oil traders, just concentrate on
running the company lean and mean. Just pay the damn spot price!

Or.. they can start laying off people! Yeah.. that's right.
Cut out the excessive number of crews and personnel or 'potong gaji'.
This will definitely cut out more costs.

This post has been edited by danmooncake: Jun 14 2009, 11:47 PM

I agree with you.

Mas March 09 Q losses is mainly due to them adopting FRS139 ,which provides that companies must marked to market(MTM）all their open positions held in financial instruments including derivatives.

As at the end of March 09,oil prices had tumbled to below USD 45 per barrel.Since MAS had hedged their fuel at around USD100,by MTM,the unrealised loss will be around USD55 per barrel(yes,crude oil and fuel oil are not the same, I am just drawing a comparison here ),hence the 557m hedging loss as booked in the March 09 Q results.

Now,the crude oil prices has climbed back to USD 71 per barrel.If MAS were to prepare their account now,and assuming that all their hedging contracts remain the same,their losses will be reduced by USD26 per barrel and will actually show a beautiful set of profit figures.

No doubt,MAS will tumble tomorrow,but any big drop(limit down will be ideal) will be an opportunity.

My two sens.

This post has been edited by lklatmy: Jun 15 2009, 12:07 AM

But one thing shall be taken note of, operating also loss money.

MAS loss money on all 3 derivatives
Fuel loss = 10 bil. (did MAS really believe oil will hit US$200?)
Interest rate loss = 2.2 bil
Foreign exchange loss = 2.7 bil

It seems the fuel derivatives loss 7.6 bil already happen in 2007

so waht is the fair prioce now? rm1.2?

3786 MAS MALAYSIAN AIRLINE SYSTEM BHD
Application for Practice Note 17/2005

Malaysian Airline System Berhad (MAS)
- Application for Practice Note 17/2005
MAS wishes to announce that it has applied and been granted a conditional
waiver (Conditional Waiver) until 31 December 2009 from being categorised as an
Affected Listed Issuer under PN 17 due to its triggering of the criteria under
Paragraph 2.1 of PN 17 in relation to shareholders equity. This Conditional
Waiver is subject to four conditions imposed by Bursa Malaysia Securities
Berhad (Bursa) as stated herein below.
With an early adoption of FRS 139 and a net unrealised mark-to-market (MTM)
loss on derivative financial instruments of RM3,328 million, the Group Equity
Holders Fund as at 31 March 2009 is negative RM458 million. The net unrealised
MTM position is mainly due to fuel hedging contracts with maturity over a
3-year period up to 31 December 2011. The unrealised fuel MTM position will
fluctuate subject to the movement in the fuel forward curve.
The Board has approved the early adoption of FRS 139 to allow MAS financial
statements to be directly comparable to most major international airlines and
to improve transparency of the financial statements.
MAS adopts a competitive fuel hedging policy, whereby it strives to have
similar fuel cost with its peer competitors. MAS gradually built its hedging
portfolio throughout the year. Due to the unprecedented collapse in fuel prices
in late 2008 and early 2009, these contracts are in MTM loss position. These
are unrealised losses as the fuel hedging contracts will mature over a 3-year
period up to 31 December 2001. The unrealised MTM position will fluctuate based
on the movement in the fuel forward curve. As at 31 March 2009, the unrealised
fuel MTM loss is RM3,383 million. On a comparable basis, using fuel forward
curve as at 29 May 2009, the unrealised fuel MTM loss has reduced by RM1,150
million. The total fuel volume hedged as at 8 June 2009 is 21.9 million barrels
for the periods up to 31 December 2011. As of 31 March 2009, MAS has hedged 47%
of its fuel requirement at USD103 per barrel for the rest of 2009. The average
hedged fuel prices for 2010 and 2011 range from USD90 per barrel to USD100 per
barrel.

Due to the unrealised net MTM losses, the Group Equity Holders Fund is
unfavourably impacted. As at 31 March 2009, on FRS 139 basis, the Group Equity
Holders Fund technically triggers the criteria under Paragraph 2.1 of PN 17 in
relation to shareholders equity. A significant portion of the negative equity
as at 31 March 2009 (on FRS 139 basis) is due to the unrealised net MTM
position (RM3,328 million).
Notwithstanding the voluntary early adoption of the new accounting standard and
the net unrealised MTM position, the Group's operations remain robust and the
'going concern' assumption remains valid.
In approving the early adoption of FRS139, the Board has also noted and
considered the following:
i) the Group's cash balance remains strong, at RM3.77 billion as at 31 March
2009 including negotiable instrument of deposits;
ii) on non-FRS139 basis, the Group Equity Holders Fund will be at RM3,396
million as at 31 March 2009; and
iii) on FRS139 basis and using comparable fuel forward curve as at 29 May
2009, the Group Proforma Equity Holders Fund would have been RM692 million as
at 31 March 2009.
The reduction in the Group Equity Holders Fund does not trigger any default or
cross default of its financial facilities.
As part of the plan to improve its equity, MAS plans to gradually lock in the
MTM gain when the opportunity arises (fuel forward curve moves upward) and
deliver underlying operating profit. On the underlying performance, MAS
continues to fast track the implementation of its Business Transformation Plan
(BTP 2), anchored on the 4-pillar strategy of dynamic pricing, network
optimisation, cost management and innovation. The Board of MAS is committed to
these ongoing measures and strategies to cease or avoid triggering the PN17
criteria by 31st December 2009.
As part of MAS enhancement in its risk management practices in relation to its
fuel hedging policy, MAS will continue to selectively buy put options which
will reduce the existing fuel hedging downside exposure. This will provide
certain protection with respect to unrealised MTM exposure in the event the
fuel price moves downward.
In granting MAS the Conditional Waiver from PN 17, Bursa has set the following
conditions:
Condition 1: The Conditional Waiver is only in respect of unrealised MTM losses
for fuel hedging contracts arising from the adoption of FRS 139. If MAS
triggers the PN 17 criteria due to reasons other than the above (e.g. realised
losses from hedging contracts), the above Conditional Waiver will not apply;
Condition 2: MAS must ensure full compliance with FRS 139 in recognising and
measuring all the financial assets, financial liabilities and certain contracts
to buy or sell non-financial items as stipulated in FRS 139 in all its
financial statements issued in the financial year 2009;
Condition 3: MAS is to take all necessary measures to cease or avoid triggering
the PN 17 criteria by 31 December 2009. In the event that the Company triggers
or continues to trigger the PN 17 criteria after the expiry of the Conditional
Waiver (i.e. 31 December 2009), MAS will be required to fully comply with PN 17
requirements;
Condition 4: MAS must take the following disclosures in its quarterly
report(s):
i) a Proforma balance sheet position in its quarterly report (QR) ended 31
March 2009, showing shareholders equity based on MTM valuation of the fuel
hedging contracts as at 29 May 2009 under the FRS 139 reporting principles;
ii) a Proforma balance sheet position without FRS 139 in all its QRs for
financial year 2009;
iii) total realised and unrealised losses due to fuel hedging contracts under
FRS 139 for financial year to-date in all its QRs for financial year 2009; and
iv) the status of the measures as referred to in Condition 3 above in all its
QRs for financial year 2009.
The Conditional Waiver granted by Bursa was after taking into consideration of,
amongst others, the following factors:
i) high volatility of the underlying assets (i.e. fuel) hedged by MAS which is
subject to MTM valuation giving rise to fluctuations in the Group Equity
Holders Fund. In this regard, it is noted that the Group Equity Holders Fund
was negative for the quarter ended 31 March 2009 based on the pricing of fuel
price at the material period but positive based on the comparative fuel forward
curve as at 29 May 2009; and
ii) the MTM losses of the Groups fuel hedging contracts are unrealised losses.



12/06/2009 07:24 PM

MAS - Underperform. TP: 2.85


Attached File(s)
 researchview_MAS_150609.pdf ( 195.89k ) Number of downloads: 12

Thanks Pana. Here is one report from CIMB, TP 1.95.


Attached File(s)
 MAS_Mar_09_results.pdf ( 320.97k ) Number of downloads: 8

The problem is, for long term investing, I can't see why we should be paying 3.xx for a company that in negative equity and no forseable profit future yet which there is surely no dividend in the next 3-5 years future.

I don't mind betting at 1.xx - 2.00

My view only.

Just to add,
MAS is an airliner company, they should hedge according to the operation needs, not act as like oil traders to guess which way oil price will go.
This is not the company objective.

Just like what plantation companies are doing, as long as the CPO price is profitable, they hedge the CPO price by selling at futures first disregard how future is look like be it up or down. You don't bet the market as long as business is profitable which is the company objective.

Maybe they are trying to achieve its delta hedge? But MAS didn't disclosed the hedges they are in, just leaving words like 'various hedges', but after booking in that kind of price to their COGS (assumed effective hedge), MAS should be continue to red for the rest of the year (if oil price don't up).

Buying this might be exposure to fuel future also, if any unrest happened at place like Iran, they might be there to ripe the profit. But always no good looking for profit from others misfortune.

Just my 2 cents.

no dividend doesnt mean the company doing not well, it could be a positive signal which they have project going on or to expand
dividend is draw out from retain earning. it could be a -neg. signal if pay dividend , which could mean they have no project or expand in future

if pay dividend yet gonna expand, which they need to issue share or whatever to collect fund again ,it cost alot from the charging ..> which isnt a wise choice..

not moving much.. Classic PROTON / PERWAJA case?

I do not have any privilege information but judging from the wording of the March09 Q announcement and the explaination that follows,it appear to me that MAS is doing hedging of their fuel needs,not trading.But the hedge gone awry due to the fall of crude oil prices in March/april this year.

Referring to MTM hedging losses in fuel oil,in today's THEEDGE Malaysia,many other major airlines are also incurring hugh hedging losses,to name some,SIA 1.18b,AirChina 994m,Cathay Pacific980m,ChinaEastern 908m.

Obviously,MAS is not alone.

Mas price din't fall much today,reflecting that there is no big sellers.The market is efficient,others know what we know.

Since MAS din't drop as much as I expect today,but if it drift slowly over a protracted period,I won't buy even at RM2. since chances of a quick rebound is minimal.

A few broking firms are recommending a sell on Mas today.

Please judge your own.

This post has been edited by lklatmy: Jun 15 2009, 12:31 PM

yeah i agree with Iklatmy , airline needs alot of fuel, and little of the price change does affect them alot.

Looks like TRANSMILE 3 years ago. Better sell now before it goes penny.

Research report by AmInvestment Bank:

[attachmentid=1024033]

The reason why I said they acted like oil traders is because :

1. They don't hedge in their history aka never or little hedge before oil price spike.
2. They only hedge when oil over 100.
3. Now the question, they got any hedge or not when oil price fall below 50 to as low as 35 during March and April? If the answer is no, their act is not different than a oil trader/speculator.

Although those fuel is indeed needed for their plane, you can't make decision (hedging) according the oil market price movement totally.

Doing business, it is not right trying to be clever or speculate your raw material is going to rise or not, then make decision (especially with billion of hedging) based on your prediction/speculation about the trend.

Do't mean company cannot hedge, but hedging must have some proper strategy and appropriate, not like suddenly no hedge, now hedging for 2 years, then no hedging again.

What should a company focus on is to maximise the capacity, cost controlling, which maximise the efficiency of runnig a company.
Whatever price increase/decrease in raw material, generally company can pass the cost to your customers one.

If the particular industry cannot pass the cost of raw material to customers which is to achieve some profit margin on long term basic, then this industry doesn't deserved to survive in the first place.

Any price increase in raw material could impact the company profit margin, but it is temporary as soon and later, this cost increase can pass to the customers/consumers one.

Before any company embarked on hedging program,surely there must be a proposal put up to the top management on the reason,timing and quantity.Only a badly managed company will leave such important function to one single person or department without proper checks and balances.

Whether MAS have their own hedging strategy or program,only their management will know.I tend to give them the benefit of doubt that they do since oil did at one stage went up to around 140 per barrel.

In real life,it is not that easy to pass on increase in raw material cost on to customers,there are always restrictions and competitors there waiting to grab your customer ,especially if your direct competitor made a right hedge ,he will undercut you.

We are all looking and commenting at the whole thing after it has happened ,what if you and I are the person in charge of buying the fueloil and we now have to buy for the next two years requirement,are we going to buy all at the current prices of around 70 per barrel?We may be right,or we may be wrong.Whatever decision we make now,as long as it falls within the predetermined framework and criteria set,and in the best interest on the company,should be alright.

Also,if we buy all the requirement for the next two years now,we can quote our ticket prices to our customers for the next two years,but is the ticket price attractive?very subjective, right!

Another case in point,HapSeng plantation sold forward their CPO at around 2000+ per metric tonne.It may appear ok now,but when cpo shot up to 4000+ previously,their shareholder were cursing.

Just my view,lets have a vitual beer

MAS hedging is the same used by almost all airlines in this region. That means, SIA does this, Air Asia, maybe Transmile, and many other airline that operate in this region.

Air Asia paid to get out of this clause. Remember what Tony said when he released the report in April? He said the loss is to pay the penalty to escape the fuel hedging thing.

Ofcourse there is always the "what-if?"

Oil companies are not dumb. Of course they wont let airlines hedge at below 50. If i own a oil company i know i wont them hedge at this price.

Random note: If the crude oil price is 140, aviation fuel will be around 160. Its higher by 15-20%.

This post has been edited by koopa: Jun 15 2009, 03:43 PM

Taken from MAS 2005 Annual Report
<<<<<
As at 31 December 2005, the Group and the Company have entered into various fuel hedging transactions from 1 January 2006 to 31 December 2007 in several lots totalling 13,635,000 (31.3.2005: 5,445,000) barrels. The cumulative estimated proceeds from hedging of marked to market value on the existing fuel hedging position (from 1 January 2006 to 31 December 2007) stands at RM350,707,890 (31.3.2005: RM240,471,000).
>>>>>

I fully understand your view.

I am in manufacturing line/business. I fully understand somehow, cost cannot passed straight away to customers in poor environment, but it is matter of time, it will happen finally (cost being passed around), if not the company or particular industry need to close shop.

If I am Hapseng shareholder, I won't be cursing the management to sell CPO at 2000+ as long as it already generate good enough profit and give good dividend. You still can produce more to sell at 4000+ forward!

As business out there is quite simple, if a particular industry/product is having high profit margin (like CPO at 4000+), it will lure a lot of new investment and company venture into it, soon or later, supply will creep out to offset the high profit margin.
That's why people in this industry never view at 4000+ is a sustainable level because profit margin is simply too much.

I understand it is a difficult decision for the management board or CFO to decide to hedge or not to hedge at 100. Just as I said before, they need to have consistent and proper strategy for it. If got hedge, then all the time hedge it. If not, then stay as no hedge. At least you either have outcome of +1 or -1, not the like -2 currently they are suffering.
I have no problem for the unrealised hedging loss, but the most issue is about how the company plan for it.

Let have a virtual beer
Cheers.

I tried to queue below RM3 but never get it. Just wandering why the share price still so high even though with bad announcement last Friday ?

Majority shareholders not wanting it to drop below RM3. So don't sell, or just sell to buy....EPF sell at high, EPF buy at high...as an example. We are merely the ikan bilis trading this stock. 52% owned by Penerbagan Malaysia. 17% owned by Khazanah and 13% owned by EPF.....

Its no wonder this stock price can steady.....The world red, I won't surprise it can still green...haha