GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap4,019 -0.10
Med Cap3,848 -0.05
Small Cap4,895 -0.24
Micro Cap8,498 -0.25

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Ticker Price Volume
GFH 0.5 1,361,733
BKSB 0.14 70,617
DANA 0.62 13,288,208
DAMAC 3.85 372,716
DSI 0.39 34,049,322
ALINMA 16.47 22,194,374
SABIC 98.09 2,208,800

Air Arabia

Source: Kuwait Financial Center - Markaz

Air Arabia

- Air Arabia (AIRA) and the benchmark Dubai Financial Market (DFM) both have declined in the YTD period. The stock has outperformed the benchmark, recording a loss of 53.8% YTD versus a loss of 69.4% for the DFM. The stock has also outperformed the 56.4% loss in the DFM transport sector index during the same period.

- In 3Q08, Air Arabia reported USD 170.1 Mn in total income, a 28.2% growth over the 2Q08 figures of USD 132.7. The Company also reported a significant 163% QoQ growth in its net profit which increased to USD 58.4 Mn from USD 22.2 Mn in the previous quarter.

- The Company’s TTM ROE, at 9%, is lower than the industry average of 25.4%(1), however its TTM ROA, at 8.3% is higher than the industry average of 7.7%.

- The Company’s Load Factor which stood at 86% and 80% for FY07 and FY06 respectively is higher than the industry average of 69% and 67% for the same period.

- In 3Q08, Air Arabia’s fuel cost to cost of sales ratio at 0.55x is significantly higher compared to 0.39x in 3Q07, primarily due to higher oil prices during 3Q08. The current economic environment, a benefit LCC’s model, coupled with softening oil prices, provides an opportunity for bottomline growth.

- Overall, we expect the Company to post a net earnings growth of 71% for 2009. At the current price level, the stock is discounting its LTM earnings by 9.7x, which is lower than our fair value PE of 12.0x, leading us to believe that there is upside potential for the stock.

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