Shares of Malaysia Airline Jump on Takeover Offer
News of a possible takeover of beleaguered Malaysia Airline System (MAS) has prompted its shares to jump as much as 10.4 per cent on Monday.
State fund Khazanah Nasional reportedly is willing to offer 27 sen for each MAS share that it does not own, amounting to some 1.4 billion ringgit ($435 million).
Khazanah owns 69.4 per cent of the troubled airline.
"We see the exercise as a good opportunity for shareholders to exit the stock," MIDF Research wrote in a note to clients on Monday. "Based on our estimates, we expect MAS' airline operations to remain loss-making over the next few years premised on the current weak yield environment and high jet fuel price."
The airline has been hurt by two major tragedies this year, all occurred in just four months apart -- mysterious disappearance of flight MH370 in March and, the downing and crash of flight MH17 in Ukraine in July.
All 298 people on board flight MH17 died, while global authorities have yet to find any remains of humans nor the ill-fated airline carrying flight MH370.
The takeover proposal had been approved by Malaysian Prime Minister Najib Razak.
"This is the first step needed to return our national carrier to profitability," he said in a statement, noting the government and the state investment firm are in the "final stages of completing a comprehensive and holistic restructuring plan."
"With due process and following the relevant approvals, we expect that a detailed plan will be announced before the end of August."
Analysts think the airline company's minority shareholders will seize the offer.
"We believe the minority shareholders would approve of the proposal, as the prospect of a sustainable turnaround remains far-fetched," RHB Research Institute Sdn Bhd analyst Jerry Lee said in a research note.
MIDF Research Sdn Bhd noted the offer of 27 sen per share is already well above industry average of 9.5 times price-to-book-value.
MAS is expected to announce on Aug 20 its April-June earnings.
Khazanah has invested over $1 billion into the airline in recent years. "Nothing less will be required in order to revive our national airline to be profitable as a commercial entity and to serve its function as a critical national development entity," the fund said in a statement.