Tuesday 22 April 2014

Analysis of Aeroflot

A Russian air transportation company

Company: Aeroflot

Business: A Russian air transportation company. They performing all the classical tasks such as Transportation of Passenger and Cargo, but also Catering, Insurance, Cargo-Handling, fuelling Services and Duty-Free Retail.

Active: Main focus Russia but are flying to 52 countries world wide

P/E: 20.6 (however what makes it a bit more interesting the P/E3: 6.4)

contrarian values of P/E, P/B, ROE as well as dividend

The P/E of Aeroflot is really bad with 20.6 which was according to them based on currency losses of over 3500 million RUB last year however the P/E3 is running at 6.4 which is much more interesting! The P/B is also excellent with 1.0 and it actually gives is a buy from Graham even with the current bad P/E. The earnings to sales are not very interesting with 1% and the ROE is also nothing to be happy with since it is only 4.6%. The book to debt ratio is also not so great since it is 0.4 but the growth! In the last five years they have had a yearly growth rate of +22.2% yearly! This then gives is with me pushing it down a motivated P/E of 30 to 50 which means it is highly undervalued today on the market no matter if you consider the P/E or the P/E3. They pay a dividend that is ok but also not more with only 2.2% which represents almost 45% of their earnings so I their very bad year they are paying out almost 50% and other wise they have been down well below 15% of their earnings.

Conclusion: Graham says yes and I find it very interesting. I have never flown with them myself but I was very close when I flew to India in February to pick them. The once I talked to said that Aeroflot has become great to fly with in the last couple of years before it was simply a nightmare. I will however stick to the golden rule of never investing in airline companies and therefore I will keep my fingers away from this cookie jar but that growth rate is a large, large temptation!

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