Indonesia Daily Focus November 23, 2020
Garuda Indonesia (GIAA) - Share price rally is ahead of fundamentals
Recently,
GIAA's share price surged by 63% since November 6 on the back of
positive news. We think all of this information is positive for GIAA
although we don't see a catalyst that can sustain the current share
price, so we think the bullish sentiment on GIAA is getting ahead of
fundamentals.
The
goal of the holding company is to increase efficiencies and create
synergies. Although the details of the strategy and the precise timeline
are not available yet, we think this could drive higher volume for GIAA
with better cost efficiencies. Nevertheless, we see limited upside risk
of this potential corporate action.
GIAA's
EGM approved the issuance of a IDR8.5tr MCB. The plan is to use this
fund for working capital and also to negotiate with lessors. In
addition, vaccine news in early November has sparked share price rally,
which we think has been the best catalyst for GIAA. However, uncertain
schedule of commercialization poses a potential risk as well
We
adjust our 2020F net loss from US$1.1bn to US$1.4bn, reflecting one-off
cost and the persistent struggles in the aviation industry. All in all,
we maintain our Sell recommendation on GIAA with a lower price of
IDR140, reflecting slower-than-expected recovery. Our target price was
derived using a target multiple of 0.2x P/S.
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