MAS should be sold but not at a loss ......?

"Putrajaya should consider selling flag carrier Malaysian Airlines System Bhd (MAS) but not at a loss, its former boss Datuk Seri Idris Jala said today. The Minister in the Prime Minister's Department said MAS was trading at RM6.00 when he was at the helm but currently the share price of the compay has tanked to 30 sen. The government's state asset manager Khazanah Nasional Bhd is the majority owner of MAS, which has posted losses for its last six quarterly results."


The above from an article on The Malaysian Insider. In principle I agree, governments should not run businesses, not in Malaysia or anywhere else in the world.

But Idris Jala mentioned that MAS should not be sold at a loss. Rather puzzling, once the company traded at RM 6 per share, the (in)famous acquisition by Khazanah was even done at RM 8 per share. Now, many rights issues further (which have diluted the value per share), the share is trading at RM 0.31.

The reason why MAS's company valuation has come down so much, is easily summed up by its Group accumulated profits, or rather (as is the case) losses: RM 8,755,439,000.00.

Can one find a potential buyer who will simply "overlook" MAS's patchy earnings history and will pay Khazanah back the price it originally paid for? Very unlikely, I think.

On a personal note, my best investment decisions ever, the ones I am most proud of, were not the ones where I made money on, but the ones where I realized I made a mistake, and sold the shares, even if it was at a loss. I have rarely regretted that.

In other words, not wanting to sell at a loss, when the fundamentals of a company have so much deteriorated, might not be a good strategy, at least in my opinion.

One organisation that also seems to disagree with Idris Jala is the EPF, which has sold down their holding of MAS to below 5% (after which they don't have to declare their trades anymore). In 2010 for instance the EPF still owned 14% of the company.

On Bursa Malaysia's website regarding MAS we can find a "Buy" recommendation by TA Securities Holding, dated March 1, 2013 under the title "The End of a Long Wait?".

Apparently the wait was not yet long enough, less than 3 months later, on May 30, 2013, TA issued a "Sell" recommendation under the title "Likely to Remain in the Red for FY 2013". MAS had again booked disappointing losses, as so often.

For those who think that the airline industry is a bed of roses, please check this website which gives a links to long lists of defunct airlines in the world, per country or continent. Many national airlines can be found there. One interesting airline mentioned on the list is "Malaysia-Singapore Airlines":

"Malaysia-Singapore Airlines (MSA) came into being in 1966 as a result of a joint ownership of the airline by the governments of Malaysia and Singapore. The airline ceased operations after 6 years in 1972 when both governments decided to set up their own national airlines. Hence from that year onwards, Malaysian Airline System, now called Malaysia Airlines, and Singapore Airlines were formed."

The financial situation of Singapore Airlines (SIA) is rather different from MAS, the below amounts are in millions of SGD: