MAS ~ share swap with AirAsia gonna help?

MAS (3786) http://www.malaysiaairlines.com/my/en.html

Background:

• On 02 April 1947, Malaysia Airlines' predecessor took to the skies with its first commercial flight as the national airline. Fuelled by a young and dynamic team of visionaries, the domestic carrier turned into an international airline in less than a decade.
• Malaysia Airline System (MAS), the national carrier of Malaysia, is recognised as one of Asia's largest, flying more than 48,000 passengers to some 100 destinations across 6 continents everyday. The airline holds a lengthy record of service and best practices excellence, having received more than 100 awards in the last 10 years.

Current Share Price:  1.41

My View:

This share has drop around 41% from 2.40 since end of 2010.

Why drop? Huge losses plus:

In Aug/Sept. 2011, US based company seeks US$80million (approx. RM240million) damages from MAS.

Is this the 1st time MAS suffer huge losses? Check out their history:

• Prior to the Asian Financial Crisis in 1997/98, the airline suffered losses of approx. RM260 million.
• In the year 2005, Malaysia Airlines reported a loss of approx. RM1.25 billion. 

Although MAS suffer losses, I will still consider this share based on following reasons::

• Value drop significantly.
• In August 2011, MAS has agreed to make alliance with AirAsia by share swap. MAS will get approx. 10% stake in AirAsia, and AirAsia will get approx. 20% stake in MAS. This share swap means ~ Airasia absorbed 20% of MAS losses and give 10% of its profits to MAS??
• Soon less competition between MAS and AirAsia?

 Major shareholders: 

• Khazanah Nasional Berhad 48.87%
• EPF with approx. 10.55%

All they need do now is to get help from AirAsia to restructure their business & become profitable. If you look at the chart above, when the news regarding share swap with AirAsia published, MAS jump up approx. 27%.

Few things you might want to consider is that no dividends pay out by MAS and the net asset per share is 0.84 ~ lower than current share price.

If you are not risk taker, you should consider put it in the bank for FD and get around 3% interest per annum. For your information, Maybank is currently having an offer from 9 September 2011 until 9 October 2011 ~ up to 4.18% p.a. on Fixed Deposit a/c.

[http://www.maybank2u.com.my/mbb_info/m2u/public/promoDetail.do?channelId=PRO-Promotions&cntTypeId=1&cntKey=PRO01.16&programId=PRO01-Accounts&chCatId=/mbb/Personal/PRO-Promotions]