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Large Cap3,912 -0.22
Med Cap3,902 0.08
Small Cap5,065 -0.07
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QNBK 143.8 312,074
SABIC 95.98 4,534,377
GFH 0.62 131,131
DU 5.58 788,634
ALMARAI 73.08 135,963
NBAD 11 4,851,634
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Air Arabia

Source: Abu Dhabi Commercial Bank

Executive Summary

• Air Arabia reported strong H1 2009 results with net profit increasing 21% y-o-y to AED 193mn due to a larger fleet and consequently greater passenger traffic. However, we expect profitability to decline in H2 2009 compared to H1 largely as a result of higher fuel costs and a lower yield due to weaker demand and adverse regional economic conditions.
• Air Arabia continued to enjoy a strong debt free balance sheet in H1 2009 with 53.2% of total assets (AED 3.1 bn) in cash and AFS investments. The company’s large cash surplus should not only support its existing business operations but also preclude the necessary of raising debt to fund expansion in the near term.
Valuation: At the current market price of AED 1.18, we believe the stock is attractively valued. Our weighted average valuation model yields a fair value of AED 1.41, implying a 19.6% upside to the current share price. We therefore maintain our BUY rating on the stock.

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