Aegean Air

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  • Aegean Airlines Outperform (from Outperform) Mkt. Price: 6.5Travel & Leisure High Risk (from High Risk) Target Price: 8.5

    FTSE MI: 462.61

    Equity Research | Update

    Changes

    Target price

    of which DPSPrevious 9.50Total stock return 31.2%

    Valuation 2014a 2015e 2016e 2017e

    P/E 5.8x 8.2x 6.4x 5.6xP/BV 2.1x 2.0x 1.8x 1.6xEV/Sales 0.3x 0.3x 0.2x 0.2xEV/EBITDA 2.7x 3.3x 2.1x 1.6xEV/EBIT 3.0x 3.9x 2.4x 1.8xDividend yield 11.2% 7.9% 10.1% 11.6%FCF yield 19% 25% 35% 41%

    Per share

    EPS 1.12 0.79 1.01 1.16

    EPS old 1.12 1.12 1.22 1.18

    DPS 0.73 0.52 0.66 0.76

    BS data (m)

    Sh. Equity 216 236 262 291

    Net debt -149 -181 -220 -252

    P&L data (m)

    Revenues 912 948 999 1,055

    EBITDA 119 86 117 132

    EBIT 106 73 104 119

    Net income 80 57 72 83

    Trading data 1m 3m 6m 12m

    Rel. Performance 8.5% 12.2% 11.3% 8.5%

    Abs. Performance 5.7% -10.3% -13.3% 5.7%

    H | L 52w 8.1 5.0

    Market cap. (mn) 464.2

    Shares outstanding (m): 71.4

    Free float (%, mn) 39% 181.5

    Avg. vol. Traded (52w): 97.45k

    Index constituent & weight:

    ASE (1.9%), FTSE LC (1.32%), FTSE MI (1.26%)

    Antonis Diapoulis, Analyst

    antonis.diapoulis@alphafinance.gr

    T +30 210 367 7532, +30 210 367 7513

    Please refer to important disclosures in the Disclosure Appendix

    Aegean Airlines is a Greek commercial full service aircraft carrier that operates scheduled and charter routes to Greek

    (domestic) and international destinations.

    Alpha Finance does and seeks to do business with companies covered in its research reports. Consequently, investors should be aware that the firm may have

    a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment

    decision.

    September 4, 2015

    RIC: AGNr.AT, BBG: AEGEAN GA

    Rating - TP EPS

    8.5 0.66

    Evasive maneuvers successful! Re-iterate Outperform Aegean lived the drama of the sharp downturn in the Greek economy after the capital controls were imposed on June 26th. The impact in terms of yields is expected to be severe (AFe FY 15e -9% y-o-y) but should be partly counterbalanced by strong traffic (July passengers up 19% y-o-y - AFe FY 15e +13.2% y-o-y). During the first three weeks the capital controls were imposed, Aegean planes were flying with good load factors as more of the tickets were pre sold. Thus, the lack of pre-booking caused by the adverse conditions in the local banking system did not have an initial effect. In order to reboot the demand in the market Aegean was forced to put additional pressure on pricing especially in domestic destinations. Additionally, demand from international travelers resumed normal levels quite fast in July as the risk was contained when Greece agreed on a new bailout. The company also exploited the inability of its biggest competitor (Ryanair) to accept Greek customers credit cards during the high demand period of July due to the capital controls situation. Overall, tourism showed a significant resilience with the overall effect being moderate for Aegean. Therefore, we believe that if a pro-bailout coalition government is formed in upcoming September 20th national elections, economic stability will gradually return and tourism is set for a very strong 2016. Aegean will find itself at a pole position against completion ready to absorb increased demand. Target price @ 8.4/share We have adopted a positive scenario for the economy as our base case, but potential investors should be cautious as the outlook for Greece is still weak.Our new target price is achieved by lower WACC (11.8% vs. 13.2% previously) but also downgrading our midterm estimates. Our EPS downgrade stands at -29% for 2015 and -14.7% for 2016 on the back of lower passenger yields. Trades at discount It comes as no surprise that Aegean currently trades at a huge discount of 66% in 15 EV/EBITDA terms compared to its EU peers. Investors discount negatively the Greek economic outlook and the uncertainty generated by the upcoming snap elections. New Assumptions In a snap, a) we increased 2015 fleet to 58 from 57 but kept our long term estimate to 58 planes, b) adjusted 2015 on the back of recent events by setting passenger yields down 9% (vs. AFe old -5%) and passengers to 11.4mn vs. AFe old 11.69mn, c) revisited our cost assumptions adjusting oil estimates (2016 hedge at $60-20/barrel vs. $ 75-77 in 2105 -- l/t EBITDAR margin 16-17% vs. AFe old 17% and

    CASK CAGR 14/17e -3.9% vs. AFe old 1.2%). 1H 15 snapshot Revenues, EBITDAR, EBITDA and net income came at 403.6mn (+6% y-o-y, AFe 402.2mn), 67mn (+-8.4% y-o-y, AFe 66.6mn), 19.7mn (-33% y-o-y) and 14.8mn (-8% y-o-y AFe 11.6mn) respectively. Yields retreated by 8% y-o-y and load factors were down 2.7% annually to 73.4% (RPK/ASK). Traffic was up 15% y-o-y to 4.9mn (2.5mn domestic +10% y-o-y - 2.4mn international +20% y-o-y). FCF was positive by 130.8mn vs. 113.9mn in 1H 14.

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    52w performance

    Vol traded (,000s shares) LH scale Adjusted price

  • Alpha Finance Equity Research Aegean Airlines

    Please read important disclosures at the end of the report. 1

    Rating: Outperform| High risk Share price performance Aegean Airlines

    Target price: 8.5 (%) 1m 6m 12m Current Price 6.5 of which DPS: 0.66 Rel 9% 11% 9% Sector: Travel & Leisure Total stock return: 31.2% Abs 6% -13% 6%

    Mkt cap (mn): 464 Free Float: 39.1% Aegean Airlines is a Greek commercial full service

    aircraft carrier that operates scheduled and charter routes to Greek

    Enterprise value 283 H | L 52w 8.1 6.4

    Headline figures 2011a 2012a 2013a 2014a 2015e 2016e 2017e

    P&L items (mn) Revenues 668 563 699 912 948 999 1,055

    Ebitda -18 3 90 119 86 117 132 (domestic) and international destinations.

    Ebitdar 62 73 162 209 196 228 243

    Ebit -31 -9 78 106 73 104 119

    Pre tax income -31 -13 75 95 78 102 117

    Minorities 0 0 0 0 0 0 0 Net income -27 -10 58 80 57 72 83 website: www.aegeanair.com

    EPS () -0.38 -0.15 0.81 1.12 0.79 1.01 1.16 DPS () 0.00 0.00 0.00 0.73 0.52 0.66 0.76 all prices as of Septemenr 3rd No. of shares, weighted 71 71 71 71 71 71 71

    Balance sheet items

    (mn) 2011a 2012a 2013a 2014a 2015e 2016e 2017e Research analyst

    Fixed assets, net 99 89 81 80 78 76 74 Antonis Diapoulis

    Cash & equivalents 167 149 222 207 240 281 315 +30 210 367 7532 Current assets 247 215 339 354 409 457 493 antonis.diapoulis@alphafinance.gr

    Total assets 418 397 561 627 661 708 742

    Equity 169 153 213 216 236 262 291

    Minorities 0 0 0 0 0 0 0

    Long term debt 71 70 51 50 50 51 52

    Long term liabs 111 110 134 125 125 126 127 Short term debt 28 12 8 9 9 10 11

    Current liabilities 138 134 215 286 300 320 325

    Equity & liabilities 418 397 561 627 661 708 742

    Cash flow items (mn) 2011a 2012a 2013a 2014a 2015e 2016e 2017e Gross cash flow -27 0 93 91 84 82 95

    working capital -22 -29 -5 -22 5 -15 -3 Operating cash flow -5 29 97 114 80 97 98

    Capex 6 1 43 50 10 11 11

    Free cash flow -11 7 47 61 69 86 86

    debt -5 -16 -23 -1 0 2 2 equity 0 0 0 -72 0 0 0 Dividends 0 0 0 52 37 47 54 Dividends to mins 0 0 0 0 0 0 0

    Net Debt/cash -68 -67 -163 -149 -181 -220 -252

    Y -o - Y change (%) 2011a 2012a 2013a 2014a 2015e 2016e 2017e

    Revenues 13% -16% 24% 30% 4% 5% 6%

    Ebitda -1900% -117% 2905% 32% -27% 35% 12%

    Ebitdar -18% 19% 121% 29% -6% 16% 7% Ebit 145% -71% -979% 36% -31% 42% 14%

    Pre tax income 66% -60% -697% 26% -18% 31% 15%

    Net income 16% -62% -653% 39% -29% 27% 15%

    EPS 16% -62% -653% 39% -29% 27% 15%

    Margins (%) 2011a 2012a 2013a 2014a 2015e 2016e 2017e

    Ebitda -3% 1% 13% 13% 9% 12% 12% Ebitdar 9% 13% 23% 23% 21% 23% 23%

    Ebit -5% -2% 11% 12% 8% 10% 11%

    Pre tax income -5% -2% 11% 10% 8% 10% 11%

    Net income -4% -2% 8% 9% 6% 7% 8%

    Ratios & valuation 2011a 2012a 2013a 2014a 2015e 2016e 2017e

    P/E -17.1x -44.4x 8.0x 5.8x 8.2x 6.4x 5.6x P/BV 2.7x 3.0x 2.2x 2.1x 2.0x 1.8x 1.6x

    EV/Sales 0.6x 0.7x 0.4x 0.3x 0.3x 0.2x 0.2x

    EV/EBITDA -22.4x 132.9x 3.4x 2.7x 3.3x 2.1x 1.6x

    EV/EBITDAR 6.4x 5.4x 1.9x 1.5x 1.4x 1.1x 0.9x

    EV/EBIT -12.9x -44.9x 3.9x 3.0x 3.9x 2.4x 1.8x

    FCF Yield -2.8% 1.9% 15.7% 19.2% 24.5% 35.0% 40.6% Dividend Yield 0.0% 0.0% 0.0% 11.2% 7.9% 10.1% 11.6%

    Payout ratio 0% 0% 0% 65% 65% 65% 65%

    Debt/equity 0.6x 0.5x 0.3x 0.3x 0.2x 0.2x 0.2x

    Net debt/ebitda 3.9x -22.5x -1.8x -1.3x -2.1x -1.9x -1.9x

    Interest covered -1.9x -1.0x 17.0x 9.8x 2.9x 11.8x 13.5x

    RoE -16% -7% 27% 37% 24% 28% 29% RoIC -9% 2% 33% 38% 14% 21% 29%

    source: company data & Alpha Finance Research Estimates

  • Alpha Finance Equity Research