KUALA LUMPUR, April 12 — Shares in Malaysian Airline System Bhd (MAS) fell as much 9.1 per cent today after the company confirmed a RM3.1 billion rights issue.
“This is expected, there could be significant dilution to the share base,” Sharifah Farah, an analyst with Kuala Lumpur-based Affin Investment Bank, told Reuters.
Earnings per share may see an 80 per cent dilution if the right issue is fully accepted, she added.
The brokerage maintained a ‘trading buy’ call on the company’s shares, citing cost and revenue improvements and efforts to renew its aging fleet.
The stock fell over 20 per cent in November when the rights issue was announced, in what several analysts described as a knee-jerk reaction.
Malaysian Airlines said the funds raised would go towards working capital, repaying debt and buying aircraft for which RM977.8 million would be set aside.
Kenanga Research said the entry of low-cost carriers such as Lion Air’s Malindo Air could put pressure on Malaysian Airlines, although the company would benefit from the better loads and cost efficiency of its new aircraft.
Shares in Malaysian Airlines were 7.27 per cent lower at 76.5 sen at 9.34am while the benchmark index gained 0.4 percent after reaching an all-time high of 1,716.47 points.
As of 11.34am, MAS’ shares fell 5.5 sen or 6.66 per cent to 77 sen, with 21.197 million shares transacted.
Yesterday, MAS disclosed to Bursa Malaysia that it would issue 13.4 billion new shares at an issuance price of 23 sen per rights shares for working capital, capital expenditure and repayment of borrowings.
RHB Research said the issuance of rights issue was higher than it had initially expected, hence the dilution impact would be greater.
“We continue to believe that with better cost controls, route rationalisation measures and the feeding in of oneworld alliance passengers, MAS’ turnaround may just materialise,” it said in a research note today.
However, it would be challenging for MAS as the intensified competition between low-cost carriers due to the entry of Malindo Air that might further put pressure on MAS’ pricing strategy, said Kenanga Research.
“A spike in jet fuel will remain as the main threat for MAS,” it added. – Reuters