--
��
| Jet Airways (India) Ltd. (JETIN IN) AirAsia receives flying licence (AOP) approval from DGCA to launch domestic air services shortly | Underweight Price: Rs231.90 07 May 2014 Price Target: Rs206.00 PT End Date: 30 Mar 2015 | |
AirAsia India receives flying license to commence domestic air services shortly: Low cost carrier AirAsia India (the three-way JV between AirAsia, Tata Sons and Telestra Tradeplace) has finally been granted an air operator’s permit (or flying license) by the DGCA. (However, the validity of the permit is subject to the final verdict of the Delhi high court). The application by AirAsia has finally received approval after a year since application. AirAsia is expected to start operations by June – July with 2-3 A320 aircraft (increasing to 8-10 in a year). The airline will use Chennai as its hub, initially connecting tier two cities. We reiterate our UW on JET Airways as competition is expected to increase post the liberalization of the Indian aviation sector.
Figure 1: AirAsia’s Shareholding Pattern (%)
Source: Economic Times
· Ticket pricing key variable: AirAsia has highlighted that they will price their tickets at a ~30% discount to existing airlines. We will monitor pricing trends in the industry in the backdrop of the emerging competition.
Figure 2: Domestic India Airline Market share (%)
Source: Financial Express
Sequence of events for the AirAsia approval
· Feb 20, 2013: AirAsia announces three-way JV to set up a new low-cost airline at an initial investment of $30 mn
· Mar 6, 2013: Gets FIPB approval; a formal clearance comes on April 5
· Sep 20, 2013: AirAsia gets no-objection certificate from the civil aviation ministry
· Oct 4, 2013: AirAsia India applies for an air operators’ permit from the Directorate General of Civil Aviation
· Jan 20, 2014: DGCA seeks fresh objections from public before issuing permit to AirAsia
· Feb 21, 2014: DGCA disposes of objections and says permit will be granted shortly upon completion of formalities
· May 7, 2014: DGCA issues AOP for AirAsia India to launch commercial operations; the clearance is subject to the decision of the Delhi HC, whose hearing is scheduled for July 11
AirAsia BHD (AIRA.KL) is covered by J.P. Morgan analyst Corrine Png.
Investment Thesis
We have an UW rating on JETIN as competition is expected to increase post the liberalization of the Indian aviation sector
Valuation
Our Mar'15 PT of Rs206 is based on a 7.75x EV/EBITDAR mulitple which is in line with the average of the listed Asian Airlines stocks
SOTP valuation table
SOTP
| |
FY16E EBITDAR (Rs MM)
|
35,322
|
Target EV/EBITDAR Multiple (x)
|
7.8
|
Enterprise Value (Rs MM)
|
273,744
|
(-) 7x FY16E Lease Rentals (Rs MM)
|
149,938
|
(-) FY15E Net Debt (Rs MM)
|
100,384
|
Equity (Rs MM)
|
23,421
|
NOSH (MM)
|
113.6
|
Target Price (Rs)
|
206
|
Source: J.P. Morgan
Risks to Rating and Price Target
Upside risks to our UW rating and price target include : Increased Network synergies from Etihad, gains in market share, and revival in the domestic demand environment.
No comments:
Post a Comment