Shares in Malaysia Airlines
(MAS) tumbled more than 20 percent to an all-time low on Wednesday as the
national carrier's MYR3.1 billion ringgit (USD$1 billion) rights issue plan
triggered fears of share dilution and uncertainty over the move.
Ahmad Jauhari, chief
executive of Malaysia's national carrier, said in a statement to the stock
exchange late on Tuesday that the rights issue was aimed at paying capital and
debt expenses, without specifying the number of shares or the price for the
issuance.
The share drop came despite
the carrier moving to a profit of MYR37.1 million ringgit in the third quarter,
reversing a loss of MYR477.6 million in the same quarter a year earlier. The
struggling carrier posted a small operating profit of MYR4 million ringgit, ending
six quarters of losses.
"The dilution on the
company from the issue will be immense, there will be supreme volatility in the
stock until there is more clarity on the exercise," an analyst from
Maybank IB Research, who did not want to be identified, told reporters.
There is no doubt the
market is over-reacting, but this is what will happen until there is input from
the management on the structure of the rights issue," said the analyst.
MAS also said it will
reduce the par value of its shares to 90 sen from 1 ringgit in order to build a
credit reserve of MYR8 billion ringgit. The company raised MYR2.7 billion in a
rights issue in 2010.
The company saw its
performance improve on lower fuel costs after it cut unprofitable routes,
asserting that cost management remained a priority.
"Revenue initiatives
have started to gain traction in the market, and combined with the improved
utilisation of the fleet and our manpower, we are beginning to see the results
of our hard work," Jauhari said in a statement.
MAS shares are down about
22.5 percent since the beginning of the year. In February, the company reported
its worst-ever loss of MYR2.5 billion ringgit for 2011, surprising analysts who
had expected its restructuring to limit losses.
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