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Tuesday, June 7, 2011

MAS to join oneworld alliance (CIMB)

Maintain UNDERPERFORM. MAS announced yesterday that it will join the oneworld alliance from late 2012, which was a positive surprise. After trying since early 2006 when its previous MD Idris Jala first broached the idea, MAS has finally succeeded. Alliance membership will give it a slew of advantages including cost sharing, access to a wider network and more attractive frequent-flier benefits. However, these will accrue only from 2013 onwards. Meanwhile, the near-term stresses of high fuel prices and yield pressures are likely weigh down MAS’s share price. We maintain our UNDERPERFORM call and target price of RM1.52, which remains pegged to 2x P/BV. We recommend a switch to AirAsia. MAS may be more interesting in 2013 once a substantial number of old planes have been replaced by new ones and the benefits from oneworld begin to materialise.

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