Bryan Lim

ECM Libra analyst Bryan Lim said that MISC's revenue for the second quarter for the year ending 2006 was flat compared to the corresponding period a year ago.

However, its net profit of RM655.3 million expanded because of increased capacity, lower depreciation and fleet manning costs, lower interest expense and the continued turnaround in MISC's engineering division.

Lim said that given the recent softening vessel prices and MISC's RM5 billion cash hoard and cash generating prowess, MISC could increase its vessel orderbook further or acquire vessels or other shipping companies directly for immediate expansion.

ECM Libra Securities' analyst Bryan Lim said the move is hardly surprising given that Singapore LCCs are currently operating in a difficult environment attributed to the escalating jet fuel prices as well as its limited international network.

"Visible signs so far include a number of Resorts World patrons who are mutual clients of Genting's Maxims Club Casino in London," ECM Libra analyst Bryan Lim said in a research report.

ECM Libra analyst Bryan Lim said revamping the domestic air services may not be as easy as there are many areas that the Government has to look into.

ECM Libra Securities analyst Bryan Lim attributed MAS' projected loss mainly to its vulnerability to fuel price increases and inability to cushion the impact due to high overhead costs.

He estimated that a US$1 (RM3.75) increase in jet fuel price would erode MAS' annual earnings by 24 per cent or RM60 million while a similar price increase would impact about 5 per cent of the earnings of AirAsia, Singapore Airlines (SIA) and Cathay Pacific.

"MAS and AirAsia are operating on difference business models.AirAsia's lean cost structure is one reason why it is able to withstand the effect of high fuel prices," Lim told Business Times.

In comparison, he said, AirAsia has a more effective fuel price hedging strategy, while MAS fuel price hedging and fuel surcharge efforts were insufficient to offset the impact of the skyrocketing oil prices.

To date, MAS has hedged around 61 per cent of its fuel requirements for the first quarter and 65 per cent of its full-year requirements at a relatively high rate of US$62 per barrel.

In addition, he said, the fuel surcharge imposed by MAS is the lowest among the world's major carriers.

Lim said MAS' overall earnings outlook for the current financial year ending December 31 2005 would remain vulnerable to the volatile fuel prices, continued increase in staff cost as well as sluggish growth in the global cargo sector.

He is revising down MAS' full-year profit forecast by 26 per cent to RM194 million from RM262 million previously, to capture the higher-than-expected jet fuel price.

Lim has also downgraded the target price for MAS shares to RM3.60 and maintains an "underperform" call on the stock.

On AirAsia's missing its profit forecast, an analyst said it is merely due to aircraft shortage to support its route expansion.

Other than that, he said, the airline's business outlook remains promising and expect things to significantly pick up from December, when it will start receiving new aircraft.

ECM Libra Securities analyst Bryan Lim said MAS simply incurred too much overhead and operating expenses to operate profitably.
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Lim added that the current fuel surcharge imposed by MAS is insufficient to cushion the impact of rising jet fuel prices.
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Lim has revised his projection to a RM360 million loss from RM192 million profit previously.

Bryan Lim, analyst at Kuala Lumpur-based ECM Libra, said the bond could help Malaysian Airline expand its operations in the region, especially to India and China.

Bryan Lim, aviation analyst with securities firm ECM Libra said it did not seem possible for all three to perform well in the competitive market, and that eventually consolidation was inevitable.

"In Singapore, there is a possibility that one budget airline will fold," he said."International flying rights are done on a government to government basis, so most of Singapore's flying or landing rights would naturally go to Singapore Airlines."

The Singapore government's investment vehicle Temasek holds stakes in both Tiger and Jetstar, giving them more financial muscle, he said.

"But Valuair has its own strategy," he said, referring to its market position as a mid-range carrier between the ultra-cheap and premium airlines, offers passengers assigned seating and serving food.
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But Lim expects low-cost carriers to do well in many of those markets.

"The Thai economy is doing well and it's very much a tourist-based market so low-cost carriers fit well with them," he said.Its large domestic market, with a population of nearly 65 million, was "big enough to sustain three budget airlines".

Indian carriers should also fare well thanks to the country's flourishing economy and huge population, he added.

ECM Libra analyst Bryan Lim said in Kuala Lumpur the bond could help the national carrier to expand its operations in the region.

"There's room for expansion in the region to India and China, so this is where the funds will go to," Lim said.

Bryan Lim, aviation analyst with securities firm ECM Libra said it did not seem possible for all three to perform well in the competitive market, and that eventually consolidation was inevitable.