GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap4,040 1.47
Med Cap3,813 1.12
Small Cap4,857 0.75
Micro Cap8,140 0.78

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Ticker Price Volume
QNBK 127 470,450
ETISALAT 17.15 1,265,926
GFH 0.6
EMIRATESNBD 8 953,900
DAMAC 3.04 4,480,836
MMG 0
SABIC 102.33 6,566,984

Air Arabia

Source: Taib Bank

Outlook

Despite the challenging global economic conditions impacting the aviation industry across the world, Air Arabia emerged stronger reporting a spike of 20.8% in its 1H09 net profits as low cost carriers benefit from lower traveller budgets at such critical times. During 1H09, the company’s margins expanded further with operating profit margin and net profit margin increasing 259 bps and 308 bps to 11.6% and 17.4%, respectively. Air Arabia will benefit from growing air traffic in the region, which is expected to remain strong, driven by its strategic location and the anticipated accelerated economic expansion in the Middle East. Air Arabia, which has a 24% share of the available LCC fleet, is seen getting a bigger slice of the market, especially with an order of 44 new Airbus aircraft that will be delivered by 2016. A recovery in oil prices should further support the company, as the ability to pass on increased fuel costs, and lack of sizeable competition in the short-term, ensure margins are protected.

Air Arabia’s stock has gained 6.74% sine the beginning of this year as against a YTD return of 8.4% for DFM Index. Currently, the stock is trading at a P/E multiple of 11.48x and P/B multiple of 0.86x, making it an attractive investment proposition. Emerging strong in the turbulent global situation, the company posted impressive results in the first half of this year. It is well placed to survive these tough times and expand its market presence substantially. Hence, we reiterate our OVERWEIGHT opinion on Air Arabia’s stock.

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