Air Astana Group: a cash-accretive airline from the heart of Eurasia (BUY - initiation of coverage)

The Air Astana Group team has – over the past two decades – developed not one, but two outstanding airlines. These have transformed aviation in Kazakhstan and Central Asia: first through the operational excellence and impeccable safety record of Air Astana airline; then again through the 2019 launch of FlyArystan, which has made air travel in Kazakhstan much more affordable. The group has never required any follow-on capital injections, beyond the initial equity investment of USD 17m, and has generated material positive cash flows and dividends (c.USD 156m) for its two shareholders. With large distances between cities, we see significant potential for the further growth of aviation in both Kazakhstan and Central Asia. The two mega-markets on its doorstep (China and India) are reachable with single-aisle aircraft, as are the Gulf and the bulk of Europe. With a young fleet, an efficient cost structure, and internal engineering, maintenance, training and handling capabilities, Air Astana Group looks well-positioned for continued, profitable growth, in our view. We initiate coverage with a BUY, setting our 12M price target (PT) at USD 10.8/share, offering 23% upside.