The latest contract increases the airline's firm orders for freighter aircraft to four. The aircraft will be operated by Malaysia Airlines Cargo Sdn Bhd (MASkargo).
"We understand that the new freighters are expected to be delivered in the first half of 2012. We view the increase in MASkargo's fleet size as in line with the group's plans to enhance its cargo business, where it is targeting 50 per cent annual growth in freighter services.
"This includes introducing new service routes which include China-Europe and China-US routes."
ECM Libra said the cargo division has been a relatively small part of the group's business. At end-June 2010, the division contributed 20 per cent to the overall group revenue.
"We have factored in the cost of two additional freighters into our fiscal year 2011 projections. As a result, borrowings have increased by 14 per cent to RM5 billion leading net gearing to rise from 1.11 times to 1.39 times. However, there is no material impact on our fiscal 2011 earnings. As such, we maintain our 'hold' recommendation and target price of RM2.08," ECM said in its report this week.
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