MAS shares suspended, Khazanah to announce corporate restructuring plans

At the time of writing the details of the restructuring plan were not made known but news of it hiving off its engineering division as a separate listed entity or an equity injection by Khazanah were making its rounds.

The pre-suspension price for MAS was 24 sen and the company’s share price had declined as much as 23 percent this year.

If the proposal takes shape, it will create a transaction worth almost RM1.38 billion. Khazanah will also acquire the shares that is doesn’t own in MAS at 27 sen per share.

Bloomberg had reported that the board of the company was convening this afternoon to discuss the company’s future direction.

MAS which has been affected badly by two major tragedies this year, the disappearance of Flight MH370 and the tragedy of Flight MH17 added stress to the company which was already reeling in losses.

MAS currently has a cash burn rate of RM5 million per day according to a report by Maybank IB which was released on June 23rd. This could exert pressure on its cash reserves but by the end of 2015 this could increase as much as 5 times and the one year time-line set by Khazanah earlier for restructuring could be too late.

MAS recorded a net loss of RM935 million for FY2013 and Maybank estimates its losses to balloon to RM1.2 billion for FY14.

In 2013, MAS successfully drove up the daily utilization hour of narrow-body planes from 9 to 11 hours.

The persistent high oil prices also acts against the company. According to Maybank, MAS would consume 15.8 million barrels of jet fuel in 2014. A US$1 per barrel increase in jet fuel prices on a full-year accounted basis would add RM51.4 million to costs.

Pong Teng Siew, the head of research at stockbroking company Inter Pacific Securities Sdn Bhd said that the government will most probably delist the company.