Transaero: the New Stage of Development
Total Page：16
File Type：pdf, Size：1020Kb
Russian Aviation Transaero: The New Stage of Development Iskander Abdoullaev Fixed income analyst +7 (495) 777-10-20 ext. 70-47-32 [email protected] OJSC «Promsvyazbank», Moscow, Smirnovskaya street, т.: 777-10-20, website: www.psbank.ru 1 Investment Research Department, t. 777-10-20(ext. 704733), e-mail: [email protected] CONTENT 1. INVESTMENT OFFER ........................................................................................................3 2. KEY ASPECT OF INVESTMENT OFFER...........................................................................3 2. CLARIFICATION ON CURRENCY PEG............................................................................4 3. PURPOSE AND EMPLOYMENT OF THE LOAN ............................................................5 4. RETURN ON INVESTMENT ..............................................................................................6 5. COMPANY PROFILE .........................................................................................................7 6. SECTOR UPDATE ..............................................................................................................8 7. KEY POSITIVE FACTORS FOR TRANSAERO..................................................................9 8. KEY NEGATIVE FACTORS FOR TRANSAERO............................................................. 10 9. SECTOR OVERVIEW....................................................................................................... 11 10. SUMMARY .................................................................................................................... 12 11. TRANSAERO 2010-2011 (FINANCIAL MODEL) ..................................................... 13 12. APPENDIX..................................................................................................................... 13 13. CONTACTS ................................................................................................................... 14 14. DISCLAIMER................................................................................................................. 15 OJSC «Promsvyazbank», Moscow, Smirnovskaya street, т.: 777-10-20, website: www.psbank.ru 2 Investment Research Department, t. 777-10-20(ext. 704733), e-mail: [email protected] 1. Investment Offer Table1. Key loan parameters for TRANSAERO 1 Rouble bond issue Type of bond Non-convertible domestic bond Issue status Expected Issuer TRANSAERO Airlines Par, currency of issue 1000 RUR Offering Public State registration number 4-01-00165-A as of 27/08/2009 Guarantors TRANSAERO Finance Amount 3 000 000 000 roubles Date of circulation 4 years (1 456 days) Early redemption terms After 12 months of outstanding at par, price: 100%. Coupon frequency Twice a year, 6 months (182 days) Lead manager Promsvyazbank Trading floor, listing category: MICEX Lombard list TRANSAERO Airlines matches the criteria of CBR Lombard list* *In February 2009, CBR of RF announced the decision to include all strategic companies of Russia in to CBR Lombard list, irrespective of credit rating. TRANSAERO is part of 259 strategic companies set up by Russian government to promote stability and development of Russian economy. Lombard list bonds guarantees refinancing for investor at the cost of the repo rate. OJSC TRANSAERO opened a book on its Series 01 bonds on September 11. Bonds are protected from ruble devaluation. The issue amounts to RUR3bn. It is to be placed in October 2009. The issue has a 4-year tenor. The issue has two put options. The first ruble put option will be in one year after placement. A put option enabling bondholders to sell bonds at a price pegged to a dollar is scheduled for 12 months. The coupon guidance was issued at 16% - 18%.The issue is guaranteed by OOO TRANSAERO-Finance. 2. Key Aspect of investment offer Created in 1991 TRANSAERO company was the first non-state airline company in Russia, initially oriented to be independent and conceptually new one. Since then the company delivered more than 26 million passengers to 135 cities in 55 countries of the world. TRANSAERO was the first Russian company to equip its flight park with the modern aircrafts of the world's leading manufactures and to train its pilots in such companies as Boeing, United Airlines, American Airlines and British Airways. Passenger traffic generates about 88% of company’s revenue, 71% of which come from international destinations. About 17% of revenue comes from local destinations and the rest from non-core businesses (cargo, and other services). TRANSAERO is Russia’s second largest airline after Aeroflot (Aeroflot is quasi government company) with 16% share of 1H 2009 total passenger traffic. According to expert magazine, ‘Airline Business’, in 2008, TRANSAERO became the 7th largest airline company in the world in terms of passenger traffic, km. Company has a successful credit history. In February 2009, company has repaid in full its first 3 year bond issue in the amount of 2,5 bn roubles. Company’s major creditors, are Russia’s top 10 biggest banks like Gazprombank, Sberbank, VTB, Alfabank and Promsvyazbank. Through out the period of bond duration, company has showed a considerable growth in terms of market share, passenger traffic and net income. According to company’s latest estimates, in two years time company’s net income is expected to increase by over four times, and reach a record 4,34 bn roubles. Company’s market share is expected to increase by 7%, to a new high of 23% in 2011. We are positive on company’s estimates, given how efficient the company is. OJSC «Promsvyazbank», Moscow, Smirnovskaya street, т.: 777-10-20, website: www.psbank.ru 3 Investment Research Department, t. 777-10-20(ext. 704733), e-mail: [email protected] 3. Clarification on Currency peg This is the hedge option that is tied to the rouble bond, and offers additional attractive returns in two case scenarios, either when rouble depreciates or if dollar loses value. According to offered terms of the loan, a put option enabling bondholders to sell bonds at a price pegged to dollar is scheduled in 12 months and is calculated accordingly: Purchase price=Offer price * (X1/X0-Z), where: Offer price- nominal price of the bond, i.e. 1000 roubles X1- Official dollar rouble exchange rate set by CBR of RF on the closed date of early redemption X0-Official dollar rouble exchange rate set by CBR of RF on the date of bond placement Z-Discount set by TRANSAERO (difference in TRANSAERO 1 rouble bond yield and currency loans) Besides purchasing price, investors receive accumulated coupon income (ACI) from the bond for the period since the start of second coupon payment till the date of the bond purchase. 4. The purpose and employment of the loan The primary purpose of the announced bond issue is to finance company’s key goals set in the financial program, which are primarily aimed at: ¾ Upgrade of company’s air fleet (500 mln roubles) ¾ Expansion of new domestic and international routes from various local Russian airports (400 mln roubles) ¾ Development of IT technology to upgrade key business processes (100 mln roubles) ¾ Construction of company’s own technical and maintenance service center in Domodedovo airport (500 mln roubles) ¾ Partial refinancing of short term debt (1 500 mln roubles) Chart1. TRANSAERO financial program, key expenditure items, (mln roubles). 1600 1500 1400 1200 1000 800 600 500 500 400 400 200 100 0 Air fleet New travel IT upgrade Service Refinancing routes centres Source: Company data OJSC «Promsvyazbank», Moscow, Smirnovskaya street, т.: 777-10-20, website: www.psbank.ru 4 Investment Research Department, t. 777-10-20(ext. 704733), e-mail: [email protected] 5. Return on investment In order to determine indicative YTM (Yield To Maturity) range for expected TRANSAERO 3 bn rouble bond issue, and given there are no other airline, or private transport company that is publicly traded in Russian rouble bond market, we can map TRANSAERO to average yield curve for Tier 3. Tier 3, currently is the most undervalued segment of Russian rouble bond market relative to sovereign yield curve. Some of the companies in the segment are Russia’s major real estate, transport and financial companies. Considering only the sound names in Tier 3 and keeping in mind that TRANSAERO is a strategic company, the indicative range is between 17%-18%. Chart2. Average YTM across all Tiers in Russian Rouble bond market, in % Tier 1, % Tier 2, % Tier 3, % 45,00 40,00 35,00 TRANSAERO 30,00 indicative level 25,00 20,00 15,00 10,00 5,00 0,00 03-Jul-09 03-Jul-08 03-Jan-09 03-Jun-09 03-Jun-08 03-Oct-09 03-Oct-08 03-Apr-09 03-Apr-08 03-Sep-09 03-Sep-08 03-Feb-09 03-Nov-08 03-Dec-08 03-Mar-09 03-Mar-08 03-Aug-09 03-Aug-08 03-May-09 03-May-08 Source: Promsvyazbank OJSC «Promsvyazbank», Moscow, Smirnovskaya street, т.: 777-10-20, website: www.psbank.ru 5 Investment Research Department, t. 777-10-20(ext. 704733), e-mail: [email protected] Chart3. Market Share as of 1H 2009 (Passengers traffic, passenger*km) 6.Company Profile Aeroflot; 24% ¾ TRANSAERO is gaining ground, being Russia’s second largest airline Others; 37% company in terms of passenger traffic and international destinations. TRANSAERO is also the third largest cargo carrier and recently became 7th largest passenger carrier in the world in terms of tourist destinations. ¾ Company’s market share increased from 14% in 2008 to 16% in Utair; 5% TRANSAERO; S7; 12% 1H2009, this is an impressive result for the market, as most of the Rossiya; 5% 16% airline companies have lost their market positions or remained idle on