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Polish Equity Research

Others

Lithuania

RECOMMENDATION

AVIA SG

BUY (MAINTAINED) CURRENT PRICE: PLN 36.6 TARGET PRICE: PLN 64 (PREV. 58)

Seasonally strong results We expect Avia to show a strong set of results on the back of seasonality. Small Planet Airlines should be profitable this quarter, with record high revenues of EUR 30m. In the MRO segment, we expect the strong sales dynamics to be maintained (+90% y/y), however, the slower season in this segment should result in lower profits q/q. BGS should perform relatively well, however, we expect some extra costs connected to the loss of WizzAir to be incurred this quarter. Finally, no surprises in the BAA segment are expected. All in all, we see EUR 64m of sales, an EBITDA of EUR 4.6m, an EBIT of 3.4m and a net profit of EUR 2.6m. Outcome: POSITIVE. Modlin Airport in Warsaw is now open (July 2012) and low-cost carriers have opened or moved their operations

PUBLICATION DATE

14 NOVEMBER 2012

Sales EBITDA EBIT Net profit

64 4.6 3.7 2.6

y/y 34% 0% -6% -4%

q/q 10% 7% 8% 15%

STOCK PERFORMANCE Price WIG rebased Buy Hold

100 90 80 70 60 50 40

FL Technics Ulyanovsk (Russia) signed an agreement with the Government of Ulyanovsk district on the construction of the new aircraft maintenance, repair and overhaul centre at the Port Special Economic Zone in Ulyanovsk. Baltic Ground Services IT completed the certification process required to start rendering ground handling services at the Lamezia Terme Airport, Italy. Change in Forecasts. We have not implemented any changes to our forecasts since our last recommendation (July 10). Change in Valuation & Recommendation. Since our last recommendation (July 10), we have increased our DCbased valuation to PLN 64, maintaining our Buy rating. The comparative valuation points to PLN 65 per share vs. PLN 64 in our previous report.

30 20

The chart measures performance against the WIG index. On 10/05/2012, the WIG index closed at 44,525.

LAST RECOMMENDATIONS Rec.

Date

Price

Price performance

on issue 12 month date target

absolute

relative (p.p)

Buy

7-10-2012

27.50

58.00

33.1%

22.8

Buy

4-26-2012

36.02

58.00

-23.7%

-25.1

Buy

1-13-2012

26.00

59.00

38.5%

33.9

COMPANY DESCRIPTION Avia Solutions Group is a group of companies engaged in the aviation services market in the field of repair, ground handling, charter operations and crew training.

ANALYST Zbigniew Porczyk, CFA (+48) 22 534 16 10 zbigniew.porczyk@bzwbk.pl

Company Data EURm

2011

2012E

2013E

2014E

Sales EBITDA EBIT Net income P/E (x) EV/EBITDA (x)

138 7.4 4.0 2.8 17.5 8.3

150 12.2 9.2 6.9 7.4 5.0

160 14.6 10.8 8.4 6.1 4.2

171 14.8 11.2 8.7 5.9 4.1

Source: Company data, DM BZ WBK estimates

167

Reuters/Bloomberg codes Market capitalisation (PLNm) Number of shares (m) Free float (%) Avg. daily turnover 3M (PLNm) 1M Price performance 9.6%

ASGG.WA / ASG PW

3M 31.6%

216 5.9 28.4% 0.0 YTD 29.1%


Polish Equity Research

EUR in millions, unless otherwise stated Sales

52

15

16

23

28

24

22

34

47

39

41

58

64

y/y

q/q

34%

10%

EBITDA EBITDA margin

3.2

0.5

1.2

2.1

3.8

1.6

1.9

1.4

4.6

-0.5

2.4

4.3

4.6

0%

7%

6.1%

3.3%

7.6%

9.2%

13.8%

6.5%

9.0%

4.0%

9.7%

-1.2%

5.9%

7.4%

7.2%

-2.4

-0.2

EBIT EBIT margin

2.2

0.1

0.8

1.8

3.3

1.2

1.5

0.9

3.9

-1.2

1.6

3.4

3.7

-6%

8%

4.2%

0.9%

5.2%

7.7%

12.1%

5.3%

6.8%

2.6%

8.2%

-2.9%

3.9%

5.9%

5.8%

-2.4

-0.1

Net profit 1.5 -0.2 0.5 Net margin 2.9% -1.1% 3.2% Source: Company data, DM BZ WBK estimates

0.6

3.2

1.1

1.0

0.9

2.7

-0.8

1.1

2.2

2.6

-4%

15%

2.4%

11.7%

4.7%

4.4%

2.5%

5.6%

-2.0%

2.8%

3.9%

4.0%

-1.6

0.2

Avia SG: Forecasts changes PLN in millions, unless otherwise stated 2012E New Previous Sales EBITDA EBIT Net profit

150 12.2 9.2 6.9

Change 0% 0% 0% 0%

150 12.2 9.2 6.9

New

2013E Previous

160 14.6 10.8 8.4

160 14.6 10.8 8.4

Change 0% 0% 0% 0%

New

2014E Previous

171 14.8 11.2 8.7

171 14.8 11.2 8.7

Change 0% 0% 0% 0%

Source: Company data, DM BZ WBK estimates

Avia SG: Valuation changes In PLN per share, unless otherwise stated New 64.0 65.2

DCF valuation Comparable valuation (based on 2012-2014E)

Previous

Change 10% 1%

58.0 64.3

Source: Company data, DM BZ WBK estimates

Avia SG: Income statement forecast PLN in millions, unless otherwise stated

Avia SG: Balance sheet forecast PLN in millions, unless otherwise stated

2010

2011

2012E

2013E

2014E

2010

2011

2012E

2013E

2014E

Net sales

88

138

150

160

171

Current assets

22

46

53

60

66

COGS

73

118

128

136

145

Fixed assets

11

25

26

26

26

14.9

20.0

22.2

24.5

25.5

Total assets

33

70

79

86

92

SG&A

8.3

14.9

13.0

13.7

14.3

Current liabilities

19

31

33

34

36

Other operating income, net

6.9

4.0

9.2

10.8

11.2

7

7

7

7

7

EBITDA

8.7

7.4

12.2

14.6

14.8

6

12

12

12

12

Gross profit

Operating profit

bank debt Long-term liabilities

6.9

4.0

9.2

10.8

11.2

-0.9

-0.9

-1.0

-0.9

-0.8

Profit before tax

6.0

3.1

8.2

9.9

10.4

Income tax

0.8

0.6

1.3

1.6

1.7

Net profit

5.2

2.8

6.9

8.4

8.7

Total liabilities

16.9%

14.5%

14.8%

15.3%

14.9%

EBITDA margin

9.8%

5.4%

8.2%

9.1%

8.7%

Operating margin

7.8%

2.9%

6.2%

6.8%

6.5%

Net profit margin 5.9% 2.0% Source: Company data, DM BZ WBK estimates

4.6%

5.2%

5.1%

Net financial income (costs)

Gross margin

bank debt

3

8

8

8

8

7

28

35

40

44

share capital

1

2

2

2

2

Minority Interest

0

0

0

0

0

33

70

79

86

92

6

2

-1

Equity

Net debt 6 10 Source: Company data, DM BZ WBK estimates

Avia SG: Cash flow forecast PLN in millions, unless otherwise stated 2010

2011

2012E

2013E

2014E

CF from operations

-2

-5

9

11

11

CF from investment

0

-16

-5

-4

-4

CF from financing

9

26

0

-3

-4

4

4

3

Net change in cash 7 5 Source: Company data, DM BZ WBK estimates

168

3q 12 results%20previews bzwbk  

http://www.aviasg.com/private/uploads/files/docs/3Q_12_Results%20Previews_BZWBK.pdf