{"id":329422,"date":"2024-09-12T00:16:21","date_gmt":"2024-09-11T16:16:21","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=329422"},"modified":"2024-09-12T00:16:23","modified_gmt":"2024-09-11T16:16:23","slug":"stock-in-focus-cebu-pacific-cebu-air-inc-ceb-12-sept-2024-by-regina-capital-development-corp","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-cebu-pacific-cebu-air-inc-ceb-12-sept-2024-by-regina-capital-development-corp\/","title":{"rendered":"Stock in Focus: Cebu Pacific \/ Cebu Air Inc. (CEB) – 12 Sept 2024 by Regina Capital Development Corp."},"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>Regina Capital Development Corp.<\/td><\/tr>
Opinion Issued on<\/strong><\/td>12 Sept 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 51.25<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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The firm\u2019s topline growth is expected to be primarily driven by projected increased travel demand for the 2nd half (2H) 2024 due to seasonal events, yet rising operational expenses, supply chain improvements and previous headwinds such as high jet fuel costs and CEB being highly leveraged could continue to affect the company\u2019s margins. Considering these factors, we are revising our Target Price on CEB to P51.25 and maintaining our BUY rating.<\/p>\n\n\n\n

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

As of the 2nd quarter (2Q) 2024, Cebu Air, Inc. (CEB)\u2019s Net Income (NI) took a nosedive to P1.31 billion, down 50.9% year-on-year (y\/y), bringing its 1st half (1H) 2024 NI to P3.55 billion, driven mainly by higher OPEX and the continuous weakening of the Philippine peso. The dip in NI occurred despite the company seeing higher revenues, growing up to P26.14 billion in 2Q 2024, and P51.44 billion in 1H 2024. <\/p>\n\n\n\n

The main contributor to the growth in revenue was the increase in segment revenues, which consist of passenger and cargo. In 2Q 2024, passenger revenues rose to P17.85 billion (+12.7% y\/y), as passenger volume increased to 6.06mn, the highest passenger count in a single quarter, due to an increased frequency of seasonal flights and high-traffic in local destinations such as Cebu, Davao, and General Santos, and in foreign destinations such as Hong Kong, Japan, Vietnam, and Australia. <\/p>\n\n\n\n

This resulted in a 1H 2024 passenger revenue rate of P35.68 billion while average fares rose by +5.7% y\/y to P3,101. Cargo revenues also experienced an improvement as it increased to P1.38 billion (+59.4% y\/y), due to a +39% y\/y increase in cargo volume and a +4% y\/y increase in yield. <\/p>\n\n\n\n

Ancillary revenues also grew to P6.90bn in 2Q 2024 (+15.6% y\/y), bringing its 1H 2024 rate to P13.12 billion (+14.8% y\/y). The increase in CEB\u2019s 2Q 2024 expenses to P23.3 billion (+15.6% y\/y) also pushed its 1H24 expenses by +15.5% y\/y to P46 billion. In addition, SEC approved CEB\u2019s quasi-reorganization through deficit reclassification last August, which removed CEB\u2019s retained deficit as of end-2023 through a counterpart application of its capital surplus. CEB estimates that this, paired with increased profitability and improved capital efficiency, will further enhance future shareholder returns and distributions.<\/p>\n\n\n\n

Recent IATA data revealed that strong travel demand was experienced in July, with international demand rising by +10.1% y\/y, and domestic demand growing by +4.8% y\/y. APAC continues to lead international passenger market growth, as there is a gradual increase in demand for travel post-pandemic.<\/p>\n\n\n\n

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