Global Research - Kuwait
Investment Update
Market Data Jazeera Airways (Jazeera) Bloomberg Code: JAZEERA KK Reuters Code: JAZK.KW • Conservative fleet expansion strategy CMP (15th July 2010): KD0.110 BUY O/S (mn): 220.0 • Restructuring, and change in strategy to improve yields Mkt Cap (KDmn): 24.2 Mkt Cap (US$mn): 83.9 • Focus on increasing market share in Kuwait Target Price P/E 2010e (x): NEG • Expansion through vertical integration and acquisitions KD0.164 P/Bv 2010e (x): 1.4
Price Performance 1-Yr Restructuring and the change in pricing strategy should increase yields High /Low (KD): 0.285 / 0.104 Demand measured by RPK (Revenue Passenger Kilometer) was impacted by the Average Volume: 1,164,581 economic slowdown, increased competition and the exit from Dubai Hub. We expect future RPK to increase considering the company’s new strategy which focuses on increasing yields. Jazeera announced that it will change its pricing strategy, focus on 1m 3m 12m profitable operations and restructure its network according to changes in demand and Absolute (%) -4.8 -38.1 -51.2 the seasonality of some routes. We expect revenues to grow at a CAGR of 15.2% Relative (%) -3.9 -23.7 -42.1 from 2008 to 2013.
Conservative fleet expansion will improve load factors Jazeera Price Volume Performance 9,000 0.30 The company will follow a conservative approach concerning its fleet expansion in 8,000 2010 and 2011, and recently announced that onward deliveries will be in line with 7,000 market fundamentals. We expect the conservative approach in increasing capacity and
6,000 0.20 lower ASK (Available Seat Kilometer) coupled with expected higher RPK to have a
5,000 positive effect on Jazeera’s load factors going forward.
4,000 Future expansions through vertical integration and acquisitions 3,000 0.10 2,000 Jazeera is expected to pursue a vertical integration strategy, and will seek strategic 1,000 acquisitions in the industry. It started with the acquisition of Sahaab Leasing - 0.00 Company which is expected to provide a new revenue stream for the company. Sahaab Leasing Company will also provide Jazeera with an access to the global aircraft Jul-09 Jul-10 leasing industry. The company will continue to operate as a subsidiary of Jazeera Jan-10 Sep-09 Mar-10 May-10 Nov-09 Airways, serving other airlines, both regionally and globally. It will be consolidated in
Volume ('000) Price (KD) the 2010 results of Jazeera.
Source: Zawya Valuations – BUY with an upside potential of 49%
Based on future earnings projections, the DCF value of Jazeera comes out to be KD0.164/share. Given the stock's closing price of KD0.110 per share on July 15th 2010, the stock is trading at 49% below the fair value. Therefore, we revise our earlier "Hold" recommendation on Jazeera Airways’ stock to "Buy". Faisal Hasan, CFA Head of Research Investment Indicators [email protected] Year 2007 2008 2009 2010E 2011E 2012E 2013E Phone: +965-2295-1270 EBITDAR (KD'000) 6,349 8,024 1,842 12,751 17,192 23,805 27,950 Net Profit (KD'000) 2,288 4,448 (8,204) (2,183) 178 2,299 4,546 Abeer Gouda EPS (Fils) 20 22.2 -37.3 -10.1 0.8 10.6 21.0 Assistant Vice President P/E ratio (x) NA 15.3 NEG NEG 133.7 10.4 5.2 P/BV ratio (x) NA 2.5 2.1 1.4 1.4 1.2 1.0 [email protected] Phone: +965-2295-1272 Source: Company Reports & Global Research
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Global Research – Kuwait Global Investment House
Valuation & Recommendation
Discounted Cash Flow (DCF) Method
In order to compute the cost of equity for the DCF method, we have used the Capital Asset Pricing Model (CAPM).
The following assumptions have been made in order to arrive at the DCF value of Jazeera Airways.
- A risk-free rate of 5.8% has been assumed.
- A market risk premium of 6.0% has been assumed.
- Calculated Beta comes out to be less than 1.0, hence being conservative we have taken beta as 1.0.
- The cost of equity derived from the above assumptions using the Capital Asset Pricing Model is 11.8%.
- The cost of debt has been assumed at 6.0%.
- Based on the above assumptions, the Weighted Average Cost of Capital (WACC) works out to be 10.0%.
- Terminal growth rate of 3.0% has been assumed.
- Based on our future earnings projections and the above assumptions for DCF computations, the DCF value of Jazeera Airways comes out to be KD0.164/share.
Jazeera Airways- Equity Valuation by DCF (KD'000) 2010E 2011E 2012E 2013E Free Cash Flow 4,625 (1,633) 2,005 11,295 Discounted Cash Flow 4,445 (1,427) 1,592 8,155 Terminal Value 166,103 Primary Value 12,764 Discounted Terminal Value 119,923 Enterprise Value 132,687 Debt (99,884) (AS at 1Q 2010) Investments & Cash equivalents 3,317 (AS at 1Q 2010) Equity Value 36,120 Shares Outstanding ('000) 220,000 Fair Value Per Share (KD) 0.164 Source: Global Research
2 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
Sensitivity Analysis
A sensitivity analysis for different estimated long-run future growth rates and weighted cost of capital is shown in table below. The table provides estimated fair values for Jazeera Airways’ shares based on a range of varying inputs.
Jazeera Airways- Sensitivity Analysis Terminal Growth rate 0.164 2.0% 2.5% 3.0% 3.5% 4.0% 9.0% 0.178 0.224 0.277 0.340 0.416 9.5% 0.132 0.171 0.216 0.269 0.332 WACC 10.0% 0.091 0.125 0.164 0.209 0.261 10.5% 0.056 0.086 0.120 0.158 0.202 11.0% 0.025 0.051 0.081 0.114 0.152
Comparable Valuation
Below we show the comparable valuation table of a sample of some of the major LCCs operating around the world.
Company Country Market Cap. Profit Margin EBITDA Margin Est. P/E Est. P/BV Est. EV to EBITDA (US$) (%) (%) (x) (x) (x) Jazeera Kuwait 90,721,649 NEG NEG NEG 1.4 18.3 Air Arabia UAE 1,082,749,118 22.9 15.2 10.1 0.8 5.0 EasyJet London 2,661,421,922 2.7 4.1 15.9 1.3 5.5 Southwest Airlines Co. US 8,829,146,000 1.0 8.5 16.9 1.5 4.5 WestJet Canada 1,784,482,592 4.3 15.4 13.3 1.2 3.9 AirAsia Malaysia 1,190,232,757 16.2 38.9 6.5 1.2 5.6 Virgin Blue Holdings Australia 617,667,540 NEG 5.6 22.9 0.8 4.0 Jetblue Airways Corp. US 1,723,047,000 1.8 15.6 15.6 2.6 5.1 GOL Brazil 3,465,212,390 14.3 8.7 12.2 2.3 6.3 Ryanair Holding Ireland 9,270,080,000 10.2 11.9 16.5 2.0 6.6 Source: Bloomberg & Global Research
3 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
Jazeera Airways – Financial Update The year 2009 was a tough year for the airline industry in general and Jazeera airways in particular. The company was hit by the general conditions affecting the industry namely the economic slowdown, and fears of the H1N1 virus. Jazeera also faced increased competition from new players such as FlyDubai and Wataniya Airways. In addition, following the regulation which halted the airline’s direct flights from its second hub in Dubai, the company restructured its network from a dual-hub in Kuwait and Dubai to a single hub in Kuwait which affected yields. Yields (Revenue per RPK) declined from 23.4Fils in 2008 to 18.9Fils in 2009. Revenues declined by 5.5% y-o-y in 2009 to reach KD46.0mn compared to KD48.7mn in 2008.
Quarterly Revenues
18,000 60% 16,000 14,000 40% 12,000 20% 10,000 KD'000 8,000 0% 6,000 4,000 -20% 2,000 - -40% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2008 2008 2008 2009 2009 2009 2009 2010 Revenues Q-o-Q Growth
Source: Jazeera Airways, Global Research
Given the tough conditions that prevailed in the industry during 2009, airlines competed in offering the lowest fares in order to attract travelers which affected yields. The average fare for Jazeera stood at KD25.01 in 2009 compared to an average fare of KD34.86 in 2008. On the other hand, the number of passengers increased by 32% y-o-y to reach 1.83mn passengers in 2009 compared to 1.39mn passengers in 2008. Revenues were volatile on a q-o-q basis. The highest growth in quarterly revenues during 2009 was witnessed in the third quarter, which covers the peak of the summer season. Revenues stood at KD15.92mn in 3Q09 increasing by 4% on a y-o-y basis from KD15.34mn in 3Q08, and jumping by 57% from KD10.12mn in 2Q09.
Demand measured by RPK (Revenue Passenger Kilometer) was impacted by the economic slowdown, increased competition and the exit from Dubai Hub. Accordingly, the company charged lower fares in order to spur demand and attract travelers resulting in lower yields. The increase in the number of passengers resulted in an increase in RPK, which grew by 17% y-o-y to reach 2.4bn in 2009. In 2009, Jazeera carried over 1.8mn passengers, capturing over 22% of the market share in Kuwait. Yield (Revenue per RPK) declined from 23.4Fils in 2008 to 18.9Fils in 2009.
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Global Research – Kuwait Global Investment House
Revenues and Yields
120,000 25 100,000 20 80,000 15 60,000 Fils
KD 000's 10 40,000 20,000 5 - -
Passenger revenue Yields
Source: Jazeera Airways, Global Research
We expect future RPK to increase considering the company’s new strategy which focuses on increasing yields. Jazeera announced that it will change its future pricing strategy. In addition, Management announced that the focus will be on profitable operations and the restructuring of its network according to changes in demand and the seasonality of some routes. During 2010, Jazeera restructured its network by cancelling unprofitable routes and reducing flights on certain routes. Currently, Jazeera flies to 12 countries and 19 destinations compared to 28 destinations in 2009. The company plans to expand its network to 82 routes in the next five years. We expect revenues to grow at a CAGR of 15.2% from 2008 to 2013.
RPK, ASK, and Load Factors
6,000 90% 80% 5,000 70% 4,000 60% 50% 3,000 40%
KDmn 2,000 30% 20% 1,000 10% - 0%
RPK ASK Load factor
Source: Jazeera Airways, Global Research
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Global Research – Kuwait Global Investment House
Supply measured by ASK (Available Seat Kilometer) increased 29% y-o-y to reach 4.0bn in 2009, resulting in a decline in the airline’s load factor from 67.2% in 2008 to 60.8% in 2009. During 2009, Jazeera added two aircrafts in 2009, and received another new Airbus A320 in 1Q 2010. Recently, it was announced by management that the company will follow a conservative approach concerning its fleet expansion in 2010 and 2011, and that onward deliveries will be in line with market fundamentals. In 2007, the airline had placed an order with Airbus for 40 brand new A320s, of which it had received 11 aircrafts, with a further 29 aircraft to be delivered over the next few years with the last fleet installment scheduled for delivery in 2016. We expect the conservative approach in increasing capacity and lower ASK coupled with expected higher RPK to have a positive effect on Jazeera’s load factors going forward.
Operating costs increased by 20% to KD51.4mn in 2009 compared to KD42.9mn in 2008. The increase in costs resulted mainly from the jump in lease costs. Jazeera reported lease expenses of KD6.9mn in 2009 compared to KD0.4mn in 2008. There was also a significant increase in maintenance expenses from KD0.2mn in 2008 to KD3.5mn in 2009.
Quarterly Operating Costs
16,000 160% 14,000 140% 12,000 120% 10,000 100% 8,000 80%
KD'000 6,000 60% 4,000 40% 2,000 20% - 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2008 2008 2008 2008 2009 2009 2009 2009 2010 Revenues Operating Costs Operating Costs/Revenues
Source: Jazeera Airways, Global Research
On the other hand, as the company starting leasing its aircrafts, depreciation expense declined from KD4.2mn in 2008 to KD1.7mn in 2009. Cost per ASK declined from US5.68 cents in 2008 to US5.04 cents in 2009. However, excluding fuel, cost per ASK increased from US3.44 cents in 2008 to US3.66 cents in 2009. Fuel costs declined by 15% on a y-o-y basis to reach KD19.2mn, forming 37% of total operating costs in 2009 compared to KD22.5mn representing 52% of total operating costs in 2008.
Total operating costs as a percentage of revenues jumped from 88% in 2008 to 112% in 2009. On a quarterly basis, total operating costs as a percentage of revenues declined from 153%% in Q4 2009 to 125% in Q1 2010. EBITDAR margin declined from 16.5% in 2008 to 4.0% in 2009. Moving forward, we expect an EBITDAR margin of 24% in 2010.
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Global Research – Kuwait Global Investment House
Operating Costs
90,000 Others 80,000 Maintenance 70,000 Insurance 60,000 Lease rentals 50,000
40,000 Overflying, landing & KD 000's ground handling 30,000 Fuel & fleet maintenance
20,000 Depreciation
10,000 Staff costs -
Source: Jazeera Airways, Global Research
Jazeera airways reported a net loss of KD8.2mn in 2009 compared to net profit of KD4.4mn in 2008. It is worth noting however that during 2008, the company reported a one-time gain of KD5.5mn from the sale of 6 aircrafts to Sahaab leasing company under a sale and leaseback agreement. Excluding the one-off gain and forex losses of KD1.1mn, the company would have reported a net profit of KD0.018mn in 2008. We forecast net profit to grow at a CAGR of 0.4% from 2008-2013.
Profitability
35% 25% 15% 5% -5% -15% -25%
EBITDAR margin Net Margin
Source: Jazeera Airways, Global Research
7 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
Jazeera‘s balance sheet grew by 1% during 2009 to reach KD73.7mn. The company’s total assets declined from KD82.9mn in 2007 to reach KD73.1mn in 2008 on the back of the sale of the six aircrafts to Al Sahaab Aircraft leasing company. Aircrafts and engines declined from KD68.8mn in 2007 to KD0.16mn in 2008 as the company transferred KD22.8mn, representing the carrying value of 2 aircrafts to non- current assets to be held for sale in 2008. The transaction was expected to be completed in 2009; however, the company decided to cancel the sale and the assets were transferred back to fixed assets.
Following the exit from Dubai hub, the company announced that currently there are no plans for a second hub and the focus will be on eyeing strategic acquisitions within the industry and increasing its market share in Kuwait. In February 2010, Jazeera Airways took the first step in its vertical integration strategy and fully acquired Sahaab Leasing for a value of KD25.6mn.
Sahaab was founded by the group of investors who established Jazeera Airways in strategic partnership with DVB Bank, Natixis Bank, and the National Bank of Kuwait. The company currently owns a fleet of nine Airbus A320s that were purchased and leased back to Jazeera Airways, and is expected to have a minimum fleet of 38 Airbus A320s by 2016.
Leverage
120,000 6.0
100,000 5.0
80,000 4.0
60,000 3.0 KD'000 40,000 2.0
20,000 1.0
- -
Debt Equity Debt/Equity
Source: Jazeera Airways, Global Research
The company’s debt to equity ratio increased from 1.13 in 2008 to 1.41 in 2009. We expect higher levels leverage in the future to support the company’s expansion plans and future acquisitions. During 1Q 2010, Jazeera’s total debt reached KD99.8mn including short term debt. The company had recently secured the financing of USD105mn funding for three Airbus A320 aircraft from European Credit Agencies.
The company is also expected to raise capital to fund the Sahaab Leasing Company’s acquisition. Jazeera announced that funding for the acquisition will be completed through a rights issue of 200 million shares at a share price of 150 fils (par value 100 fils) to existing shareholders. The rights issue will increase Jazeera’s capital to KD42mn from the current KD22mn. The rights issue is expected in 3Q2010.
8 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
Outlook
The year 2009 was a tough year for Jazeera airways following the exit from Dubai Hub and the lingering effects of the financial crisis. However, the company has taken several measures which are expected to improve performance. We believe that the company’s current expansion strategy will help improve the airlines’ profitability. Jazeera has recently decided to delay its fleet expansion and focus on restructuring the company’s network by cancelling unprofitable routes, while focusing on routes with high demand. We expect the conservative fleet expansion strategy to have a positive effect on load factors. The company had also recently changed its pricing strategy which will help improve yields.
In addition, following the exit of the Dubai Hub, Jazeera announced that there are no current plans for a second hub. However, the company will focus on grabbing the highest market share in Kuwait. The company has taken a couple of steps to revamp its services including a new sales channel in Kuwait via the Galileo Global Distribution System (GDS), introducing a more transparent all inclusive fare system, allowing extra baggage to all passengers, launching a new business class and offering business travelers exclusive services.
The company will pursue a vertical integration strategy, and will seek strategic acquisitions in the industry. It started with the acquisition of Sahaab Leasing Company which is expected to provide a new revenue stream for the company. Sahaab Leasing Company will also provide Jazeera with an access to the global aircraft leasing industry. The company will continue to operate as a subsidiary of Jazeera Airways, however serving other airlines, both regionally and globally. It will be consolidated in the 2010 results of Jazeera.
9 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
INCOME STATEMENT JAZEERA AIRWAYS KD '000 2007 2008 2009 2010E 2011E 2012E 2013E
Revenues 34,709 48,705 46,009 53,304 63,603 78,759 98,898 Operating costs (28,363) (42,951) (51,498) (51,922) (57,848) (70,611) (88,320) Gross profit / (loss) 6,346 5,754 (5,489) 1,382 5,756 8,149 10,578 Other income 1,013 1,659 2,808 3,253 3,180 3,544 3,956 Gain on sale of fixed assets - 5,564 - - - - - Foreign currency (loss)/gain 2,668 (1,134) 631 947 1,042 1,146 1,261 General and administrative expenses (4,877) (4,347) (4,427) (4,510) (4,749) (5,479) (6,511) Finance costs (2,840) (2,838) (1,727) (3,081) (4,799) (4,719) (4,282) Contribution to KFAS (21) (42) - (23) (28) (34) (43) National labour support tax (NLST) - (116) - (127) (152) (188) (237) Zakat (2) (53) - (58) (69) (85) (107) Profit / (loss) for the period 2,288 4,448 (8,204) (2,217) 181 2,334 4,615 Minority interest - - - (33) 3 35 69 Net Profit 2,288 4,448 (8,204) (2,183) 178 2,299 4,546
P & L Appropriation Account: Retained earnings opening 931 2,988 6,970 (3,233) (5,417) (5,247) (3,064) Profit for the year 2,288 4,448 (8,204) (2,183) 178 2,299 4,546 Transfer to reserves (231) (466) - - (9) (115) (227) Bonus Shares - - (2,000) - - - - Retained earnings closing 2,988 6,970 (3,233) (5,417) (5,247) (3,064) 1,255 Source: Company Reports & Global Research
10 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
BALANCE SHEET JAZEERA AIRWAYS KD '000 2007 2008 2009 2010E 2011E 2012E 2013E
Property and equipment (net) 75,612 38,380 26,895 157,046 164,386 171,759 173,825 Deposits 2,314 2,314 - - - - - Due from a related party (Non-Current) - - 28,558 - - - - Goodwill - - - 3,447 3,447 3,447 3,447 Current Assets 77,927 40,694 55,453 160,493 167,833 175,206 177,271 Non current assets classified as held for sale - 22,737 - - - - - Due from a related party (Current) 95 5,125 12,879 - - - - Inventories, expendable parts and supplies 146 146 162 533 636 788 989 Trade and other receivables 1,668 1,762 1,932 3,198 3,180 2,757 2,967 Cash and bank balances 3,068 2,591 3,312 3,307 3,201 3,066 2,393 Total Assets 82,903 73,054 73,738 167,532 174,850 181,817 183,620
Share capital 19,999 19,999 21,999 21,999 21,999 21,999 21,999 Legal reserve 336 801 801 801 810 925 1,153 Equity transcation costs (46) (46) (46) (46) (46) (46) (46) Retained earnings 2,988 6,970 (3,233) (5,417) (5,247) (3,064) 1,255 Equity attributable to the Parent Company's Shareholders 23,276 27,725 19,521 17,337 17,516 19,814 24,361 Minority interest 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Total Equity 23,276 27,725 19,521 17,338 17,516 19,815 24,361
Term loans 44,067 - 13,772 79,998 76,798 72,958 59,826 Post employment benefits 275 457 663 658 790 948 1,138 Lease maintenance provision - 158 3,532 4,092 4,882 6,046 7,592 Non-current Liabilities 44,342 615 17,967 84,748 82,470 79,952 68,555 Term loans 3,506 19,210 1,373 7,864 7,549 7,172 5,881 Due to banks - 12,147 12,337 7,896 11,844 12,436 12,996 Deferred purchase consideration - - - 24,819 24,819 24,819 24,819 Trade and other payables 6,495 7,622 13,759 13,326 17,173 21,265 26,702 Deferred revenue 5,283 5,735 8,781 10,384 12,148 14,828 18,547 Due to a related party - - - 1,157 1,331 1,530 1,760 Total Liabilities and Equity 82,903 73,054 73,738 167,532 174,850 181,817 183,620 Source: Company Reports & Global Research 11 Jazeera Airways July 2010
JAZEERA AIRWAYS
Global Research – Kuwait Global Investment House
CASH FLOW STATEMENT KD '000 2007 2008 2009 2010E 2011E 2012E 2013E
Profit / (Loss) for the year 2,288 4,448 (8,204) (2,183) 178 2,299 4,546 Adjustments for: Depreciation 3,866 4,511 1,963 4,940 5,320 5,713 5,953 Finance costs 2,840 2,838 1,727 3,440 4,799 4,719 4,282 Post employment benefits 148 182 206 (5) 132 158 190 Gain on sale of fixed assets - (5,564) - - - - - Loss/(gain) on foreign currency revaluation (2,558) 1,134 (631) - - - - Operating profit/(loss) before working capital changes 6,584 7,549 (4,939) 6,192 10,429 12,888 14,971 Change in inventories (33) (0) (16) (371) (103) (152) (201) Change in trade and other receivables (781) (95) (170) (1,266) 18 424 (210) Change in trade and other payables 2,276 1,127 6,137 (847) 3,847 4,092 5,437 Change in deferred revenue 2,904 451 3,047 1,603 1,764 560 2,680 791 3,719 1,163 1,546 Change in receivablesNet cash from from related operating party activities - 10,950 (5,029) 3,125 4,161 12,87910,557 18,750 - 16,745 - 21,096 - 25,261 Lease maintenance provision - 158 3,374 Acquisition of property and equipment (26,809) (47,944) (4,864) (10,097) (12,660) (13,086) (8,019) Cash from subsidiary on acquisition - - - 701 Increase in deposits (2,170) - (1,287) - - - - Disposal of property and equipment - 63,493 - - - - - Change in due from a related party (Non-Current) - - - 28,558 - - - Net cash used in investing activities (28,979) 15,549 (6,151) 19,163 (12,660) (13,086) (8,019)
Capital contribution - Rights issue 9,999 ------Expenses of rights issue (46) ------Term loans 10,812 (28,363) (4,065) 9,879 (3,514) (4,217) (14,423) Term loans ( Current) (925) 12,147 189 (4,441)(3,081) (4,799) 3,948 (4,719) 592 (4,282) 560 DueEffects to aof related exchange party rate changes on term loan 2,596 - (1,071) - 594 - (40,274) - 174 - 200 - 230 - FinanceNet cash costs from financing activities 19,596 (2,840) (20,125) (2,838) (5,010) (1,727) (37,917) (4,192) (8,144) (17,916)
Net increase in cash and cash equivalents 1,568 (415) (604) (4) (107) (134) (673) Cash and cash equivalents at beginning of year 1,497 3,027 2,549 1,982 1,978 1,872 1,737 Effects of exchange rate changes on cash and cash equivalents (38) (63) 38 - - - - Cash and cash equivalents at end of year 3,027 2,549 1,982 1,978 1,872 1,737 1,064 12 Source: Company Reports & Global Research Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
FACT SHEET JAZEERA AIRWAYS 2007 2008 2009 2010E 2011E 2012E 2013E
Liquidity Ratios Current ratio (times) 0.12 0.76 0.86 0.07 0.07 0.06 0.06 Quick ratio (times) 0.12 0.76 0.86 0.07 0.06 0.06 0.06 Cash ratio (times) 0.05 0.06 0.06 0.02 0.02 0.02 0.02
Profitability Ratios Gross profit margin 18.3% 11.8% -11.9% 2.6% 9.0% 10.3% 10.7% EBITDAR margin 18.3% 16.5% 4.0% 23.9% 27.0% 30.2% 28.3% EBITDA margin 18.3% 15.6% -11.2% 9.5% 14.9% 15.1% 14.1% EBIT margin 7.2% 6.3% -15.4% 0.2% 6.6% 7.9% 8.1% Net profit margin 6.6% 9.1% -17.8% -4.2% 0.3% 3.0% 4.7% ROAE 13.3% 17.4% -34.7% -12.0% 1.0% 12.5% 20.9% ROAA 3.3% 5.7% -11.2% -1.8% 0.1% 1.3% 2.5%
Efficiency Ratios Asset turnover 0.5 0.6 0.6 0.4 0.4 0.4 0.5 Fixed asset turnover 0.5 1.3 1.7 0.3 0.4 0.5 0.6 Accounts receivable turnover 26.2 28.4 24.9 20.8 19.9 26.5 34.6 Average collection period 13.9 12.8 14.7 17.6 18.3 13.8 10.6 Payables turnover 5.4 6.1 4.8 3.8 3.8 3.7 3.7 Payables days 68.0 60.0 75.8 95.2 96.2 99.3 99.1 Inventory turnover 219.1 294.3 334.8 149.5 99.0 99.2 99.4 Inventory days 1.7 1.2 1.1 2.4 3.7 3.7 3.7
Leverage Debt to equity (times) 2.0 1.1 1.4 5.5 5.5 4.7 3.2 Debt to total assets 57.4% 42.9% 37.3% 57.2% 55.0% 50.9% 42.9%
Share Valuation Ratios Number of shares (in 000) 113,697 199,989 220,000 220,000 220,000 220,000 220,000 BV per share (Fils) 204.7 138.6 88.7 78.8 79.6 90.1 110.7 EPS (Fils) 20.1 22.2 (37.3) (10.1) 0.8 10.6 21.0 Market price share (Fils)* NA 341.0 190.0 110.0 110.0 110.0 110.0 Market capitalization (KD'000) NA 68,196 41,800 24,200 24,200 24,200 24,200 Enterprise Value (KD'000) NA 28,835 24,212 92,474 93,014 89,523 76,333 EV/ EBITDAR NA 3.6 13.1 7.3 5.4 3.8 2.7 P/E ratio NA 15.3 NEG NEG 133.7 10.4 5.2 P/BV ratio NA 2.5 2.1 1.4 1.4 1.2 1.0 Source: Company Reports & Global Research *Market price for 2010 and subsequent years as on July 15, 2010
13 Jazeera Airways July 2010
Global Research – Kuwait Global Investment House
The following is a comprehensive list of disclosures which may or may not apply to all our researches. Only the relevant disclosures which apply to this particular research has been mentioned in the table below under the heading of disclosure.
Disclosure Checklist Company Recommendation Ticker Price Disclosure Jazeera Airways. Buy JAZEERAKK KD0.110 1,10 JAZK.KW
1. Global Investment House did not receive and will not receive any compensation from the company or anyone else for the preparation of this report. 2. The company being researched holds more than 5% stake in Global Investment House. 3. Global Investment House makes a market in securities issued by this company. 4. Global Investment House acts as a corporate broker or sponsor to this company. 5. The author of or an individual who assisted in the preparation of this report (or a member of his/her household) has a direct ownership position in securities issued by this company. 6. An employee of Global Investment House serves on the board of directors of this company. 7. Within the past year , Global Investment House has managed or co-managed a public offering for this company, for which it received fees. 8. Global Investment House has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 9. Global Investment House expects to receive or intends to seek compensation for investment banking services from this company in the next three month. 10. Please see special footnote below for other relevant disclosures.
Global Research: Equity Ratings Definitions Global Rating Definition Buy Fair value of the stock is >10% from the current market price Hold Fair value of the stock is b/w +10%/-10% from the current market price Reduce Fair value of the stock is b/w -10%/-20% from the current market price Sell Fair value of the stock is < -20% from the current market price
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