{"id":327466,"date":"2024-04-11T00:18:00","date_gmt":"2024-04-10T16:18:00","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327466"},"modified":"2024-04-11T01:02:55","modified_gmt":"2024-04-10T17:02:55","slug":"stock-in-focus-cebu-pacific-cebu-air-inc-ceb-11-apr-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-cebu-pacific-cebu-air-inc-ceb-11-apr-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Cebu Pacific \/ Cebu Air Inc. (CEB) – 11 Apr 2024 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>CEB<\/td><\/tr>
Company Name<\/strong><\/td>Cebu Air Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>11 Apr 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 55.35<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

CEB\u2019s aggressive fleet build-up, which is expected to accelerate this year with the delivery of 14 additional aircraft, makes it better positioned to capture a bigger slice of the pie compared to its competitors who are still not back to pre-pandemic capacity. <\/p>\n\n\n\n

Considering management\u2019s guidance of 12-15% growth this year, and even accounting for the conversion of its preferred shares to common shares, CEB is still trading at a very attractive 2024 P\/E of 3.4x. This is several magnitudes below CEB\u2019s ex-pandemic average P\/E of 8.0x, and the consensus Target Price of P55.35 would bring that multiple up to a still acceptable 6.1x. As such, we remain a BUY on CEB.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

CEB soars back to profitability<\/h3>\n\n\n\n

The budget airline reported a net income of P7.9-Billion in 2023, a complete turnaround from last year\u2019s loss of P14.0-Billion. However, this was padded by non-core gains from aircraft sale & leaseback transactions, mark-to-market gains on convertible bonds, and tax benefits from utilization of deferred tax assets. On a pre-tax core basis, income for the year was P4.2-Billion, from last year\u2019s net loss of P14.6-Billion. This is still 59% below the pre-pandemic figure, mainly due to higher fuel costs (+21% vs 2019) and higher opex (+14% vs 2019). On a topline basis, however, revenues were 7% higher than 2019 due to an increase in average fares per pax.<\/p>\n\n\n\n

Revenues lagged estimates, reported net income in-line on non-core<\/h3>\n\n\n\n

CEB\u2019s topline was 10.1% behind the P100.8-Billion expected by analysts, and pre-tax income was a major 45.4% disappointment vs consensus estimate of P7.7-Billion. However, non-core gains and tax benefits managed to put reported net income slightly above the forecast of P7.3-Billion. We attribute lagging revenue to grounded aircraft and its major competitors recouping some of the domestic market share they lost during the pandemic, while higher fuel, depreciation, and operating expenses contributed to the pre-tax income disappointment.<\/p>\n\n\n\n

P&W problem is a less pressing issue now<\/h3>\n\n\n\n

Management said during the analyst briefing that the Pratt & Whitney engine issues are less of a concern now than they were last quarter. While a significant portion of their fleet will be grounded throughout the year due to engine maintenance, spare engine availability has improved and an increased fleet size would reduce the impact on their revenues.<\/p>\n\n\n\n

Management guidance<\/h3>\n\n\n\n

Despite the increased depreciation expense, higher repair and maintenance costs, and higher financing cost from the aircraft acquisitions, management is forecasting 12-15% bottom line growth this year from robust travel demand and capturing additional market share from competitors.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Check how many brokers recommend this stock<\/h2>\n\n\n\n
\n
All Stock Rankings<\/a><\/blockquote>