Indonesia Daily Focus December 10, 2020
Garuda Indonesia (GIAA IJ) - Recovery continues in October 2020
We
expect operational performance to keep improving amid COVID-19 in 4Q20
as the end of the year is approaching. However, we expect only a mild
recovery as the government recently cut the year-end holiday.
In
10M20, GIAA's passenger carried came in at 739k, which was a new record
high since its rock bottom at 35k in May 2020. The recovery was led by
the improved performance of Citilink, followed by Garuda Indonesia's
domestic performance, while its international performance remained
sluggish.
On
the expenses side, CASK stayed low at 6.24 US cents as GIAA tried to
keep cost and fuel price relatively flat. We expect cost contribution to
revenue to gradually decline going forward.
On
the yield side, it looks like the figure hit the bottom and then turned
around in 10M20 by recording 6.59 US cents. Although tighter
competition amid COVID-19 is a potential risk, we think yield can be
managed well at year-end on the back of slightly rising demand.
All
in all, we maintain our Sell recommendation on GIAA with a price of
IDR140. Our target price was derived using a target multiple of 0.2x
P/S. Key risk to our call is a subsiding number of new COVID-19 cases.
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