One last bet for MAS punters

Kuala Lumpur

PUNTERS could not resist one last bet on Malaysia Airlines (MAS) on Wednesday, ahead of an extraordinary general meeting on Thursday to vote on a proposal to privatise and delist the national carrier at a price that for long-term investors is rock bottom.

It was the most heavily traded counter with 300 million shares changing hands on Wednesday. After touching an intra-day high of 26.5 sen, MAS closed half a sen up (2 per cent) at 26 sen - just one sen shy of the 27 sen offered by Khazanah Nasional as part of a plan to restructure and rebuild the floundering airline.

A broker said more stable market conditions aided in the last-minute push. Because online trading fees are 0.21 to 0.42 per cent - some brokerages might even throw in other discounts - he said it was still possible to eke out decent returns despite the slight margins.

Punters expect Khazanah's proposed scheme of selective capital reduction and repayment (SCR) will be approved by minorities who own the balance 30.63 per cent of shares not held by the state investment agency. The buyout will cost Khazanah, which owns 69.4 per cent, RM1.4 billion (S$541 million). It will inject a further RM1.6 billion to retrench and retrain some 7,000 staff or a third of MAS's workforce, and another RM3 billion in working capital for a new entity to be formed to take over the operations, assets and liabilities of the airline.

For the SCR to succeed, the Minority Shareholder Watchdog Group (MSWG) said the proposals must receive the approval of disinterested shareholders (minorities) by at least 50 per cent in number and 75 per cent in value at the EGM. Moreover, the value of the votes cast against the SCR must not be more than 10 per cent of the disinterested shareholders'. Minorities have been advised by the SCR's independent adviser to accept the offer, as they would get nothing if the airline is wound up and liquidated.

Given MAS's "ailing financial position, bleak prospects and future", MSWG chief executive Rita Benoy Bushon said this would be best since shareholders (being the last residual interested party in a liquidation) would be the worst affected and last in line to receive their dues. Already in a financial vortex, MAS has been pushed to the wall by two aircraft disasters this year, and its daily cash burn rate is estimated at RM5 million.

At the end of August, Khazanah unveiled a resuscitation plan which includes rightsizing the new entity and a new chief executive to helm it. Despite a whopping RM17.4 billion injected by the government since 2001, MAS suffered cumulative losses of RM8.4 billion from 2001 to mid-2014.

Some minorities think the board has not exercised a duty of care. In a letter to the editor of freesheet theSun, longtime shareholder AJ said many had invested expecting eventual returns. "Khazanah owns 70 per cent and only now it realises this mismanagement? Why should minority shareholders settle for 27 sen? Strip its assets and sell it piece by piece, auction off the airline. I'd rather go down that road."