FREE Stock in Focus: CEB (22 July 2019) by Regina Capital Dev’t Corp.

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Summary of Broker’s Recommendation
BROKER RECOMMENDATION TARGET PRICE ISSUED ON
Regina Capital Dev't Corp. HOLD 95.05 22 July 2019

 

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Our Partner Broker’s Recommendation

The strong recovery that CEB is showing and the efforts it is undertaking to improve its efficiency prompted us to revise our earnings forecast upward and change our Target Price accordingly to PHP 95.05/share. Although, we would recommend to HOLD as it no longer provides any upside at this level.

 

Our Partner Broker’s Analysis

CEB’s first quarter results were strong, with top and bottomline recording +15.97% year-on-year (y/y) and +138.42% y/y expansion respectively. Aside from servicing more passengers in the 1st Quarter of 2019, the average published fuel price was also lower. This minimized the effect of the peso’s depreciation. It is likely that the firm will show better 2019 results compared to last year’s given the strength it has exhibited so far.

The airline is also in the midst of a refleeting program that aims to increase its fleet’s fuel efficiency which will likely aid its margins’ recovery as well. With its latest order with Airbus, CEB is targeting to have 83 aircraft by 2022. The aircraft ordered are more fuel efficient and has a lower cost per seat.

Aside from that, the airline is also looking into ramping up its Clark and Cebu hubs as part of its commitment to help alleviate congestion in NAIA. Its A320NEO orders will be deployed in Clark and Cebu as the 2 has been exhibiting strong growth beginning last year.

Management also sees that it’s possible for its Clark operations to mimic the scale in the Manila hub though this may take around 15 years; they are looking into offering more flights to Japan, South Korea, and China from Clark are possible.

 

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AP Securities (formerly Angping & Associates Securities)
AP Securities (formerly Angping & Associates Securities)

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