A Work Project presented as part of the requirements for the Award of the Master’s Degree in Finance from the Nova School of Business and Economics. EQUITY RESEARCH – LATAM AIRLINES Diogo Fernandes da Silva Amaral Firme Work project carried out under the supervision of: Professor Francisco Martins 22-05-2020 ABSTRACT This report contains the description of a valuation performed on LATAM Airlines, the largest airline in South America. This study was conducted by analysing the factors that may affect the company’s value (both macroeconomic, industry, and company-specific factors), whilst also performing a series of scenario analyses, given the uncertain times which characterize the present. An estimated share price (the target value for the 31st of December of 2020) was then computed, which prompts us to recommend investors to sell their positions on LATAM Airlines. Keywords: LATAM Airlines, Valuation, Share Price, COVID-19, LCCs MASTER IN FINANCE LATAM AIRLINES GROUP COMPANY REPORT AIRLINES 22 MAY 2020 STUDENT: DIOGO FIRME
[email protected] COVID-19 and aviation in Latin Recommendation: SELL America Price Target FY20: 2,35 $ A change of scenario in South American aviation Price (as of 22-05-2020) 2,58 $ Reuters: LTM, Bloomberg: LTM:US ▪ We recommend investor to SELL their position on LATAM Airlines Group, given our 2020 target price of $2,35. 52-week range ($) 1.75-12.16 ▪ The COVID-19 crisis and the resulting travel restrictions are Market Cap ($bn) 1.643 heavily impacting LATAM’s results in 2020. The current Outstanding Shares (m) 606.4 uncertainty in the general market & aviation industry has Source: Bloomberg increased the systematic risk and probability of default, which is reflected in our estimated bankruptcy probability of 20%.