EUR 150.00 For Business Accounts Only

Aegean Airlines | Re-calibrating numbers for capital raising terms

Reflecting the actual number of shares – Following the announcement of the capital raising terms (offer price at €3.20 per share, 18.75m new shares to be issued), we have recalibrated our model to reflect the actual number of shares post-money (90.2m vs our pro-forma estimate for 83.4m). The completion of the €60m capital increase will pave the way for the disbursement of the €120m grant to Aegean (within 20 days post completion). Post the raising and the grant, and assuming a cash burn of c€130m (c€70m ex PDPs) in 2021, we estimate the group will finish the year with a net cash position of €94m (ex-leases).

Warrants give the Greek state scope to participate in the upside – As regards the warrants to be issued, these will account for 11.5% of the share count post the capital raise on a pre-dilution basis, namely 10.37m shares (10.3% of share capital post dilution). The strike price will be equal to the capital raising offering price, namely €3.20 per share. As a reminder, warrants can be exercised between years 2-5 post the capital raise, thus offering to the Greek state optionality to participate in the upside. Note, however, that Aegean has the option of buying back the warrants (at a price equal to the difference between 60-d VWAP and the exercise price). In our model we utilize a Black-Scholes pricing model to estimate the value of the warrants, treating them as an equity claim and subtracting them from the valuation.

Key dates – 27 May – 4 June: Rights trading period, 27 May – 9 June: Rights exercise period, 10 June: allocation of any unsubscribed shares, 14 June: detailed announcement of the outcome of the offering, 15 June: AthEx approval regarding the admission of new shares to trading, 16 June: new shares commence trading.

Main shareholders to participate in full – Aegean’s main shareholders (>5% stakes), accounting for 60% of total shares have committed to participate in full in the capital raise and to also acquire up to 20% of any unallocated shares. Two more shareholders with a 2.3% stake also announced their intention to fully participate in the capital raise.

Re-open play underpinned by the return of demand – April was the first month in more than a year without cash burn, driven by acceleration in bookings as EU vaccinations rollout picked up. Though flight activity was limited to c20% of 2019 in Q1’21 and cash burn continued a bit below last year’s Q2 (€64m), Q2’21 leaves some room for optimism, with c40% of activity returning and cash break-even indications, as demand re-emerges. Looking into H2’21 mgt is targeting some 80% of normal operations, underpinning our forecasts for H2’ 21 revenues at c76% of 2019 levels.

Valuation – Aegean’s outlook remains far less uncertain than that of other airlines given its strong liquidity position and skew to leisure travel. Recalibrating our model for the exact terms, we set our post money PT at €6.3, still predicated at c6x 2023 EV/EBITDAR, at the high end of the usual long run average range. We reiterate our Buy rating and our view that Aegean’s solid fundamental position and liquidity will help it leverage returns upon recovery.