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Friday, June 17, 2011

Malaysian Airline System Bhd – oneworld, one enemy (CIMB)

During yesterday’s briefing on its oneworld alliance membership, MAS reiterated the benefits which include tapping into a global network of connectivity, a seamless travel experience, frequent flier benefits and airport lounge access. We agree that joining oneworld is the right move and a MAS-Qantas partnership through the alliance could form an effective counterweight to the recently announced SIA-Virgin Australia tie-up.

But we continue to rate MAS a SELL as the 2Q loss is expected to be much larger than the 1Q loss and the benefits of the alliance will only start flowing through in 2013. We maintain our EPS forecasts and target price of RM1.52, which is based on 2x P/BV.

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