Malaysian Airline Slumps on Planned Rights Issue

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Malaysian Air Slumps on Planned Rights Issue
A Malaysian Airline System Bhd. aircraft takes off from Chek Lap Kok Airport in Hong Kong, China. Photographer: Jerome Favre/Bloomberg

Malaysian Airline System Bhd., the nation’s largest long-haul carrier, slumped to a record low in Kuala Lumpur trading after announcing plans to raise as much as 3.1 billion ringgit ($1 billion) from a rights issue.

The stock fell 17 percent to 84 sen, its lowest close since the shares began trading in 1987, according to data compiled by Bloomberg. The carrier has slumped 35 percent this year, compared with a 5 percent advance in the benchmark FTSE Bursa Malaysia KLCI Index.

Malaysian Air, which hasn’t decided on the price or entitlement basis for the rights offer, is seeking funds to pare debts and to help pay for new fuel-efficient planes. The carrier is also working on a turnaround plan as it contends with slower global travel and competition from budget carrier AirAsia Bhd.

“Most investors are not quite in the mood for a massive cash call,” Joshua Ng, an analyst at RHB Capital Bhd., wrote in a report today. “We remain cautious on Malaysian Air given the extent of its structural and operational problems that are not adequately addressed with a turnaround plan that we find shallow.”

The carrier separately yesterday posted its first profit in seven quarters. It had net income of 37.1 million ringgit in the three months ended Sept. 30, compared with a loss of 477.6 million ringgit a year earlier. Revenue fell 2 percent to 3.47 billion ringgit, it said.

The stock is rated underperform at RHB with a price target of 83 sen. Of the 16 analysts tracked by Bloomberg, only one has a buy recommendation. Two have holds while the remaining 13 recommend selling the shares.

Plane Payments

The Subang Jaya, Malaysia-based airline will use some of the rights-offering proceeds to make pre-delivery payments to Boeing Co. and Airbus SAS in the next two years for new aircraft. It also proposes restructuring its capital by cutting the par value of its existing shares to 10 sen each, the company said in a filing yesterday.

Reduced capacity helped Malaysian Air cut its fuel costs by 9 percent, it said in the statement. Yields, a measure of average fares, rose 3 percent while passenger numbers fell 1.5 percent to 3.3 million in the quarter. Average jet-fuel cost was $131 per barrel in the period, or 4.4 percent lower, the company said.

“Revenue initiatives have started to gain traction,” Chief Executive Officer Ahmad Jauhari Yahya said in a separate statement. “Our focus remains to increase revenue and manage our costs.”

The carrier started flying Airbus A380s to London in July. The superjumbos have helped lure lucrative business travelers, Duncan Bureau, senior vice president for sales, said in an October interview.

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