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Air Arabia

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Submitted By mehakkgupta
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AIR ARABIA PJSC
Highlights

FIN 324
Research Report
Date :

RE

Economic Impact: In 2010-2011, the Middle Eastern carrier traffic rose by 8.9% and the passenger traffic rose by 6% which shows that air travel has become the preferred method of transportation in this region. There was a rise in fuel prices by 36.6% compared to 2010 and the airline hedged 17% of its fuel consumption in 2011. According to IATA, International freight demand will grow at 4.9% in the Middle East, the strongest growth among the regions.

Price: AED 0.59
Ticker: PJSC
Recommendation: BUY
Price Target : AED 0.79
Future Plans: Air Arabia plans to remain focused by capitalizing on their strength and remains the leading low cast air travel provider for the region with more number of destinations and highest-quality services. It aims at establishing more hubs to Link the whole range of the Arab World to Africa and Europe. It also signed agreement with Airbus to acquire 44 A320 aircraft by 2016.

Financial Analysis: As of 2011, the ROA decreased from 4.86% in 2010 to 3.85%. The ROE also dropped slightly by 0.54%. Profitability and asset management ratios decreased by a slight percentage but the airline portrays operating efficiency. In addition the liquidity position of the firm is very strong and the airline has seen a reduction in its dividend payout ratio.

Buy Recommendation: Based on the target price of Air Arabia’s Stock, the recommendation is to BUY. As we can see in the appendix the Market Price as of 31/12/2011 is AED 0.59, and our targeted price is AED 0.79. The stock of Air Arabia is undervalued by 33.89%.

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Business Description

Air Arabia is the first and biggest ease bearer to work in the Middle East and North Africa with operations starting in October 2003. The UAE Ministry of Economy

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