GIAA
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Targeting 38% upside. BUY
23nd May 2019
Price Rp 412
Target price Rp 570
23nd May 2019
Price Rp 412
Target price Rp 570
Focus on Margin
- After GIAA began their cooperation with Sriwijaya Group last year, the company is optimistic they can improve both GIAA and Sriwijaya group performances.
- As of 1Q19, GIAA’s domestic passenger yields grew 39.7%yoy while Citilink was up by 55.6%, Sriwijaya 149.5% and Nam Air 97.8%.
- Overall domestic passenger yields in 1Q19 increased 20.4% yoy to 7.6 USCent with a full year target of 7.74 USCent.
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Improvement in profits
Valuation: 38% upside
- During 1Q19, amid rising fuel prices and ticket prices, GIAA has improved its profitability by increasing the top line by 19.7% yoy and the bottom line by 130.7% yoy.
- GIAA is also locking in fuel hedges at 69 USCent/L, this plus low season in 1Q19, led to a fuel cost decrease of 9.4% yoy.
- GIAA will also cut unprofitable routes.
- In addition the government has responded to public concern over soaring airline ticket prices since the end of last year by lowering the upper limit on fares by 15%. We believe, this will not have much impact as there was a large increase in late 2018 and additional baggage fees for low cost carriers.
- We estimate bottom line in 2019F -2020F to reach USD.69.1 mn and USD. 102 mn respectively
Valuation: 38% upside
- We are targeting a TP within one year of IDR. 570/share which is 10x PER. With 38% upside potential, we recommend BUY.
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