By CHARLES MWANIKI
In Summary
- Kenya Airways share has shed 12 per cent in the past six months, despite a rally of most Nairobi Securities Exchange listed stocks.
- Citigroup expects KQ to report a net loss of Sh7.9 billion (Sh6.93 per share), compared to Sh7.5 billion (Sh6.66 per share) estimated previously.
Citigroup’s research arm has downgraded its target price for the Kenya Airways
stock citing an expected fall in the airline’s earnings for the year.
The national carrier’s stock was trading at Sh11 on Friday, which is
lower than Citi’s projection of between Sh13 and Sh12.
The share has shed 12 per cent in the past six months, despite a rally of most Nairobi Securities Exchange listed stocks.
In an analysis based on the airline’s performance
in the March 2013 quarter, Citi projected the company’s net profit would
fall due to an estimated nine per cent reduction in expected revenue
from Sh101.9 billion to Sh98.3 billion in 2013.
“For financial year 2013 estimated, we expect
Kenya Airways to report a net loss of Sh7.9 billion (Sh6.93 per share),
compared to Sh7.5 billion (Sh6.66 per share) estimated previously.
This would be a substantial fall from a net profit
of Sh1.65 billion (Sh3.58 per share) in 2012 financial year,” says Citi
research in its report.
Citi retained its earlier forecasts for 2014 -2015
as a net loss of Sh3.13bn (Sh2.09 per share) in 2014 and a net profit
in 2015 of Sh0.6 billion (Sh0.41 per share).
In addition to the 3.7 per cent decline in
passenger traffic already reported, they also expect passenger revenue
yield to fall by an estimated six per cent.
“We are concerned that current losses could
undermine cash flow, such that Kenya Airways may need to raise more
capital, both debt and equity,” adds Citi.
On the upside, Citi sees a potential of Kenya
Airways raising the additional capital from Etihad Airlines should their
code sharing partnership with prove to be successful.
Etihad has a strategy of deepening its alliances
by taking equity stakes in other airlines rather than participating in
one of the three main global alliances.
KQ finance director Alex Mwangi had given a positive outlook
in April, saying that the airline expects to close the year with a
modest profit that’s is however less than 25 per cent of the Sh1.7
billion net profit posted the prior year.
Passenger volume in the quarter was flat compared
to a year ago, likely to have been caused by the Euro-zone recession and
possible concerns over violence in the run-up to last month’s elections
affecting tourism.
The main source of capacity reduction was Europe
(-30.4 per cent compared to a year ago), due to the suspension of its
route to and from Rome and reduction in service to and from London.
The main routes that recorded capacity growth were
the Middle East /India/Far East and East Africa. Asian growth was
mainly due to Boeing 777s replacing Boeing 767s as well as the launch of
a new route to New Delhi.
No comments :
Post a Comment