MAS

The story oI Malaysia Airlines starts in the golden age oI travel. A joint initiative oI the Ocean
Steamship Company oI Liverpool, the Straits Steamship oI Singapore and Imperial Airways led
to a proposal to the Colonial Straits Settlement government to run an air service between Penang
and Singapore. The result was the incorporation oI Malayan Airways Limited (MAL) on 12
October 1937.
On 2 April 1947, MAL took to the skies with its Iirst commercial Ilight as the national airline.
Fuelled by a young and dynamic team oI visionaries, the domestic carrier turned into an
international airline in less than a decade.
With the Iormation oI Malaysia in 1963, the airline changed its name to Malaysian Airlines
Limited. Soon aIter, Borneo Airways was incorporated into MAL. Within 20 years, MAL grew
Irom a single aircraIt operator into a company with 2,400 employees and a Ileet operator using
the then latest Comet IV jet aircraIt, six F27s, eight DCs and two Pioneers.
In 1965, with the separation oI Singapore Irom Malaysia, MAL became a bi-national airline and
was renamed Malaysia-Singapore Airlines (MSA). A new logo was introduced and the airline
grew exponentially with new services to Perth, Taipei, Rome and London. However, in 1973, the
partners went separate ways. Malaysia introduced Malaysian Airline Limited, which was
subsequently renamed Malaysian Airline System or in short, Malaysia Airlines. Today, Malaysia
Airlines Ilies around 50,000 passengers daily to some 100 destinations worldwide.
The airline holds a lengthy record oI service and best practices excellence, having received more
than 100 awards in the last 10 years the more notable ones are listed below.
Awarded by Skytrax UK
O World's Best Cabin Crew (20012004, 2007, 2009)
O 5-star Airline (20052007, 2009)
O conomy Class Onboard xcellence (2006)
O World`s Best conomy Class Award (2010)
O StaII Service xcellence Ior Asia Award (2010)
Awarded by World Travel Awards
O World`s Leading Airline to Asia (2010)
O Asia`s Leading Airline (2010)
O Asia`s Leading Business Class Airline (2010)

www.malaysiaairlines.com

AirAsia
AirAsia needs no introduction in ASAN, where it is the leading low-cost carrier, connecting
people and places across 132 routes, 40 oI which are oIIered by no other airline. In 2010, the
Group, which includes aIIiliates AirAsia Thailand and AirAsia Indonesia, reinIorced its
leadership position with two remarkable milestones: Ilying its 100 millionth guest and breaking
the RM1 billion proIit barrier.
From an airline with two aircraIt plying six routes in Malaysia in January 2002, AirAsia has
soared in the last nine years to cover 65 destinations in 18 countries. Today, employing more
than 8,000 staII and with a market capitalisation oI just over RM7.06 billion (as at 31 December
2010), it is the only Truly ASAN airline, serving the region`s 600 million population Irom 10
hubs in three countries - Kuala Lumpur, Kuching, Penang and Kota Kinabalu in Malaysia;
Bangkok and Phuket in Thailand; and Jakarta, Bali, Bandung and Surabaya in Indonesia.
In 2011, we introduced two hubs, Chiang Mai Ior AirAsia Thailand and Medan Ior AirAsia
Indonesia.
Singapore Iunctions as a virtual hub where AirAsia Ieatures among the top 10 airlines in terms oI
contribution to passenger traIIic. Further strengthening its ASAN network, the Group in
December 2010 signed an agreement to establish a Philippine-based low-cost aIIiliate, which is
expected to be operational by end 2011.
The quest to democratise air travel began when Tune Air Sdn. Bhd. Iounded in 2001 by Dato`
Sri Dr. Tony Fernandes, Dato` Pahamin Ab. Rajab, Dato` Kamarudin Meranun and Dato` Aziz
Bakar - bought over the loss-making, debt-riddled AirAsia Irom HI COM Holdings Berhad (now
DRB-HICOM Berhad) Ior a token sum oI RM1. The enterprising group quickly settled the
airline`s debts and set about rebranding and relaunching AirAsia as a low-Iare carrier.
The Group`s entire business model centres around a low-cost philosophy which requires its
operations to be lean, simple and eIIicient. Several key strategies have been employed towards
this eIIect, including:
O igh Aircraft Utilisation
AirAsia Iocuses on high Irequency and high turnaround oI Ilights, both oI which add to
customer convenience and greater cost eIIiciencies. Its turnaround oI 25 minutes is the Iastest
in the region.
O ow Fare, No Frills
This means no Irequent Ilyer miles or airport lounges in exchange Ior lower Iares. Guests have
the choice oI paying Ior in-Ilight meals, snacks and drinks.
O !oint to !oint Network
All short-haul AirAsia Ilights (Iour-hour Ilight radius or less) and medium- to long haul
AirAsia X Ilights are non-stop, doing away with the need Ior human resources, physical
inIrastructure and Iacilities at transit locations.
In addition, a decision was made in December 2004 to convert the existing Ileet oI ageing
Boeing B737s with the higher capacity yet more Iuel-eIIicient, reliable and cost-eIIicient Airbus
A320s. As a result, today, the Group boasts the largest and newest A320 Ileet in the region. OI
its 90 aircraIt, 86 are A320s, and the Group has in its order book an additional 89 A320s to be
delivered. The Iour remaining B737s in AirAsia Indonesia are to be phased out by 2012,
Iollowing which there will be less duplication oI manpower requirements and reduced need to
stock maintenance parts.
Collectively, these strategies have established AirAsia as the lowest-cost airline in the world,
with a cost/ASK (available seat kilometre) oI US3.67c. This has been achieved without
compromising saIety. The highest priority is given to saIe operations, and AirAsia complies with
conditions asset by regulators in all the countries where it operates. The Group also partners with
the most renowned maintenance providers to ensure its Ileet is always in the best condition.
Innovative use oI technology has played a key role in AirAsia`s success story, beginning with
online booking. It was the Iirst airline in Asia to go ticketless -in March 2002 - allowing guests
to pay Ior their bookings by credit card over the phone. Over the years, it has built on its IT
platIorm to increase the ease oI customer transactions as well as provide greater savings to the
Group. In 2010, AirAsia unveiled its latest IT booking innovation in the Iorm oI New Skies,
which allows customers to better manage their online bookings. With the advent oI the social
media, tools such as Facebook, Twitter and blogs have become integral to the Group`s customer
relationship initiatives. AirAsia is, in Iact, recognised as the most popular airline in the region on
Facebook in terms oI Ian base.
The spirit oI innovation is also reIlected in AirAsia`s Iinancial strategies. The company`s
spectacular turnaround within18 months oI operations sealed the stamp oI Iinancial wizardry that
has continued to help the airline grow and win accolades such as the 2010 Asiamoney`s Best
Managed Company.
While known Ior its no-Irills approach, AirAsia is also synonymous with youthIul energy and a
cheeky sense oI Iun, as captured in its campaigns and branding strategies. The airline regularly
sponsors sporting and entertainment events, and in 2010 launched AirAsiaRedTix.com, an online
gateway to world class perIormances.
AirAsia is ultimately a people`s airline. This is mirrored in numerous acts oI generosity that
show the management truly cares. In January 2010, the Group joined hands with UNICF to
raise RM438 million (US$128million) Ior relieI eIIorts targeted at Haitians aIIected by the
earthquake. The airline also runs an on-going Donate Your Loose Change campaign to help
needy heart patients receive treatment at the National Heart Institute in Kuala Lumpur.
The Group`s adherence to best practices has been recognised via numerous awards over the years.
Perhaps most notably AirAsia has been voted the World`s Best Low Cost Airline Ior two
consecutive years, in 2009 and 2010. This award, Irom Skytrax, reIlects the opinions oI about 18
million travellers worldwide who were polled by the London-based aviation consultant. AirAsia
Ieels proud oI such endorsement and is committed to living up to guests` expectations by
continuing to keep costs down while providing the highest levels oI service and eIIiciency as it
spreads its wings Iurther and wider across the skies.


Advantages and disadvantages of stock swap
The most common structure that acquisitions take with large public companies is through stock swap.
That is, the acquiring company issues shares oI its stock in exchange Ior the stock in the company being
acquired. So, iI the acquiring Iirm, Company A, has stock currently trading Ior about $10 per share and
has agreed to acquire Company D Ior $500 million, it would need to issue 50 million oI its shares and
parcel those out to the stockholders oI Company D, who would trade them Ior their own shares in
Company D. Thus, Company A now has all the stock hence ownership--oI Company D.

The stock swap has some advantages and disadvantages, but the Iormer tend to win out. The advantage
Ior many stockholders oI the acquired company is that the transaction does not typically involve any
capital gains tax liability, thereIore reduce taxes. The sellers are simply swapping ownership shares. They
have not realized any gain (or loss) until and iI they sell that stock.
Besides, in a stock swap, the shareholders oI the new entity receive a particular number oI shares
Irom the acquiring corporation`s stock matched Ior their numbers oI stock held. Most oI the time,
there is a grace period where the shareholders must wait beIore they can sell the acquired stock.
Some employers let you trade company stock you already own to acquire option stock.
Stock swap is also used to pay oII accumulated debt. The only time this may not be done is iI the
company has declared bankruptcy and the debtor must wait until the creditor is out oI bankruptcy
court.

One disadvantage oI a stock acquisition is that the values oI the transaction can change iI the value oI the
stock oI the acquiring company Iluctuates substantially beIore the deal is completed. For example, in the
above example the parties had agreed on a $500 million value. Should the stock market in its collective
opinion Ieel that this is not a good deal Ior Company A, the price oI the stock may be driven down, let`s
say to $9 per share. II the stockholders oI Company D still get 50 million shares, then the value oI that
stock is down to $450 million. Depending on what was negotiated, the acquiring company may have to
pony up more shares, in this example 5.5 million more shares, to keep the value the same.
So, who benefits from the deal between MAS and AirAsia
CM Libra, in its research note, said the partnership would allow AirAsia to continue what it
does best with less predatory competition, while MAS can concentrate on serving the premium
segment with better revenue yield. It also said that there are opportunities Ior cost-savings as
both airlines would be able to bargain better Ior Iuture aircraIt purchases, as well as minimise
duplication oI resources such as that in the maintenance, repair and overhaul (MRO) area.
AirAsia currently outsources its MRO to Singapore but the share swap deal could push the low-
cost budget carrier to use MAS services instead. An analyst agreed the partnership will allow
MAS to cut the queue Ior aircraIt such as the A380 as AirAsia is one oI Airbus` largest
customers with more than 200 orders and options. MAS used to have clout with the airplane
makers but its scant purchases over the years have diminished. MAS will only start getting the
A380s next year, some Iour years aIter the initial delivery scheduled Ior May 2008. Besides,
MAS can get more aircraIt, Iaster and cheaper, iI AirAsia is in the picture..
In the end, Malaysia will beneIit Irom having two airlines that can cater to all segments oI the
passenger and cargo market. Both sides can win Irom this deal as it can resolve MAS operational
issues. That`s the one thing that has dragged it down. The bottom line is the bottom line must be
black. There are very Iew options leIt Ior MAS.
reman`s contrarian strategy
!ersonal !rofile
David Dreman graduated Irom the University oI Manitoba (Canada) in 1958. AIter graduating,
he worked as director oI research Ior Rauscher Pierce, senor investment oIIicer with Seligman,
and senior editor oI the Value Line Investment Service. In 1977, he Iounded his Iirst investment
Iirm, Dreman Value Management, Inc., and has served as its president and chairman.
Investment Style
It is reported that Dreman came to contrarian investing the hard way. In 1969, Dreman, a junior
analyst at the time, was Iollowing the crowd as the shares oI companies with negligible earnings
skyrocketed. He is quoted as saying, "I invested in the stocks du jour and lost 75 oI my net
worth." As a result oI that painIul lesson oI Iollowing the herd, he became Iascinated with how
psychology aIIects investor behavior and became a contrarian investor.
In ontrarian Investment Strategies, Dreman essentially states that he believes there are
relatively simple, proven strategies you can use to beat the marketparticularly contrarian
approachesyet most investors 'cannot Iollow through and stick to these strategies. Why can`t
they?
According to Dreman, investors cannot Iollow simple strategies to beat the market because they
are prone to overreaction, and, under certain well-deIined circumstances, overreact predictably
and systematically. For instance, iI a stock is considered 'goodit`s one oI the 'hot stocks
you read about in the paper, hear about on cable TV, or get tips about Irom your Iriends and
coworkersinvestors consistently overprice it. II a stock is 'badits price has been dropping,
the company is making negative headlines, there are concerns about its industry`s Iuture
investors underprice it. What`s more, this overvaluing oI the supposed 'best stocks and
undervaluing oI the supposed 'worst oIten goes to extremes.
Dreman thus Iound that the market is driven by how investors react (or, perhaps more to the
point, overreact) to 'surprises. These Irequent surprises include earnings reports that exceed or
Iall short oI expectations, government actions that might aIIect a stock, or news about new
products. What`s more, he believed that these surprises were oIten precipitated by analysts
mainly Wall Street analystswho were more oIten than not wrong about their earnings Iorecasts.
When you put investors` tendency to overreact together with the Irequent surprises in the market,
you get to the crux oI why Dreman believed so much in a contrarian approach. Surprises occur a
lot, he believed, and because the 'best stocks are oIten overvalued, good surprises can`t
increase their values that much more. Bad surprises, however, can have a very negative impact
on them. On the other hand, because they already tend to be undervalued, the 'worst stocks
don`t have much Iurther down to go when bad surprises occur. When good surprises occur,
however, they have a lot oI room to grow. And, Dreman Iound, the eIIect oI an earnings surprise
continues Ior an extended period oI time.
His conclusion: Buy out-oI-Iavor stocks because surprises (positive and negative ones) are
commonplace. II you own Iavorites, you`ll get clobbered by negative surprises but won`t get
much upside by positive surprises; whereas iI you own out-oI-Iavor stocks, you`ll hardly be
penalized Ior negative surprises but will be rewarded handsomely by positive ones.
This sounds logical, but Dreman Iound that even people who had an idea oI this concept oIten
didn`t Iollow it. Part oI the explanation Ior that, he Iound, was that people tend to be overly
optimistic. They have unrealistic optimism about Iuture events, thinking such events will come
out better than they realistically are likely to be. In other words, they view themselves in an
unrealistically positive light and they have unrealistic conIidence in their ability to control a
situation.
For example, they may believe that having lots oI inIormation will shield them Irom surprises in
the market because they have studied everything worth studying and thereIore know all that`s
worth knowing. An example Dreman gives regarding how this overoptimism can play out is the
securities analyst who knows that high-Ilying stocks will drop Irom the skies Iaster than a
pelican diving Ior a Iish iI earnings come in below the Street`s expectations. Yet the same
analyst will still recommend high Ilyers because he is conIident he knows enough about the
stocks he has recommended so there is no chance they will experience negative surprises. That
might happen to other analysts, he thinks, but not to him. OI course, given the unpredictability oI
the market and events surrounding it, there`s a good chance it will happen to him.
The bottom line Ior Dreman is that investors should never underestimate the probability oI a
negative surprise occurring, because they occur quite oIten, and can send an overvalued stock
tumbling.





(Liquidity Ratio) MAS AirAsia Benchmark (tiger)
Current Ratio:
Cucnt Assct
Cucnt LubItcs

4,014,759
5,485,515

3,175,439
2,160,618

215,452
149,972

0.73 1.46 1.43
Acid Test Ratio:
Cush+RcccubIcs
Cucnt LubItcs

625,536+857,580
5,485,515

676,303+201,660
2,160,618

21,262
149972

0.27 0.41 0.14
Receivables Turnover:
SuIcs
Acugc Nct RcccubIcs

11,106,582
857,580

3,864,459
201,660

486,176

12.95 19.16
(Solvency Ratio)
Debt to Total Assets:
1otuI cbts
1otuI Asscts

293,867
4,014,759

553,967
3,175,439

109,620
215,452

0.07 0.17 0.5
(ProIitability Ratio)
ProIit Margin on sales:
Nct Incomc
Nct SuIcs

107,241
11,106,582

1,055,075
3,864,459

28,254
486,176

0.27 0.06
Return On Assets:
Nct Incomc
Asscts

107,241
4,014,759

1,055,075
3,175,439

28,254
215,452

0.03 0.33 0.13
Asset Turnover :
Nct SuIcs
Asscts

11,106,582
4,014,759

3,864,459
3,175,439

486,176
215,452

2.77 1.22 2.26
Return On quity :
Nct Incomc
ShuchoIdc
|
sLqut

1,055,075
3,640,405

28,254
417,673

0.29 0.07
PS: 7.2 38.4 0.07
P/ ratio:
Mukct Pcc pc Shuc
AnnuuI Lunngs pc Shuc

2.09
7.2

2.53
38.4

1.86
0.07

0.29 0.07 26.5

Dividend Yield:
Most Rcccn PuII cu dcnd
Cucnt Shuc Pcc