01 October 2012 Asia Pacific/Indonesia Equity Research Airlines (Air Transportation) / UNDERWEIGHT PT Garuda Indonesia Tbk (GIAA.JK / GIAA IJ) Rating OUTPERFORM* Price (27 Sep 12, Rp) 620.00 INITIATION Target price (IDR) 900.00¹ Upside/downside (%) 1,389,093.5 Mkt cap (Rp mn) 14,037,418 Capital drag priced in; this bird should fly (US$ 1,467) Enterprise value (US$ mn) 1,514 ■ Discounted valuation the key attraction. We initiate coverage of Garuda Number of shares (mn) 22,641.00 Free float (%) 28.0 Indonesia (GA) with an OUTPERFORM rating, believing that its discounted 52-week price range 770.0 - 395.0 stock price and organic top-line growth combined with management and ADTO - 6M (US$ mn) 1.6 equipment-led cost cuts provide adequate appeal and compensate for *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months. increasing competition and rising balance sheet leverage. Research Analysts ■ Operational goals well within reach despite competitive environment. Timothy Ross Robust market growth and a segmented product should allow GA to expand 65 6212 3337 its yield while holding loads steady, allowing earnings to rise ahead of
[email protected] consensus for the next two years. We do anticipate a decline in FY14E Leonard Huo, CFA NPAT, however, as rising ownership costs more than offset improvement in 65 6212 3062
[email protected] underlying earnings. ■ Reclaiming lost ground. Re-fleeting will permit focus on the neglected domestic LCC business, the reclamation of GA’s natural long-haul revenue stream and the creation of a short-haul premium market.