THE proposed privatisation of Malaysia Airlines (MAS) is critical for its survival and the minority shareholders should accept the 27 sen per share offer at the forthcoming extraordinary general meeting (EGM), an analyst said yesterday.
“Basically, MAS is going under water and shareholders are unable to recoup their investment. So, for the minority shareholders, it is better to take the 27 sen offer rather than being left empty handed,” said RHB Research Institute regional transportation analyst Ahmad Maghfur Usman.
“The saving grace for MAS at this point is privatisation and the other option is to declare bankruptcy.”
He was painting the scenario for MAS minority shareholders ahead of the crucial EGM on Thursday.
Ahmad said if the EGM voted against privatisation, Khazanah Nasional Bhd, which owns the majority stake in MAS, would not want to inject funds into it, making it tougher for the airline to restructure.
Khazanah had in August unveiled a radical 12-point restructuring plan costing RM6 billion to save MAS. Of that, RM1.4 billion would be paid out to the minority shareholders if they accepted the 27 sen offer.
It would also pave the way for the delisting of MAS from Bursa Malaysia.
“Going for bankruptcy is very challenging. This will also be the worst-case scenario for the minority shareholders.
Ahmad said the 27 sen offer was an attractive one.
“While it’s not really much from where the share price is currently trading at, for the minority shareholders, it is an attractive exit offer.”
He said the privatisation of MAS would ensure a smooth transition for the restructuring process, as well as insulate investors from being exposed to deeper losses.
Delisting, Ahmad said, was a necessary first step towards restructuring, unlike the case of Petronas
privatising the Malaysian International Shipping Corp (MISC) in the 1990s.
“MISC was a different landscape back then as it had successfully disposed of its container vessels division, which was bleeding losses. The shipping industry was then at the bottom of its cycle and could only go up,” he added.
He said in the case of MAS, the situation was the total opposite as the airline was now facing very aggressive competition.
He contended that there was no basis for minority shareholders to demand more than the 27 sen offered.
“The outlook for MAS is very challenging. Since the announcement on the restructuring, I haven’t seen any meaningful changes in terms of the game plan.
“It is still offering discounts and it will be an ugly scenario over the next two quarters in terms of earnings,” Ahmad highlighted
Given the intense competition in the industry, he said the minority shareholders should brace for a very tough four to five years ahead without the restructuring, while expressing confidence that the majority of them would accept the offer.
He said what was immediately crucial was for MAS to return to profitability and in this light, he hailed the plan to cut the workforce by 30 per cent, although this would entail a RM1.2 billion compensation.
“If MAS is able to trim the workforce by 30 per cent, you are looking at an annual saving of about RM700 million.
“On top of that, and assuming the privatisation becomes successful, the interest saving from the debt to equity conversion, would boost earnings as well.”
Ahmad said for MAS’ employees, it was a difficult transition period with the possibility of losing their jobs, but Khazanah has been accommodative with its back-up plan, which would see retrenched employees absorbed into other employment opportunities. Bernama