OREANDA-NEWS. June 07, 2010. Aeroflot released FY09 IFRS results, with revenue showing a 27% YoY decline to USD3.34bn. The company’s EBITDA of USD 461m represented a lesser decrease (-11% YoY), implying a 14% EBITDA margin (vs 11% in 2008). The results slightly underperformed the consensus, reported the press-centre of  OTKRITIE Financial Corporation.

View: The increase in EBITDA margin was a result of lower jet fuel prices and cost cutting activities. The Group’s passenger yield fell 25%YoY due to general market conditions, though the decrease in passenger yield was partly offset by cost cutting measures.

In 2009, the company saw a significant (33%) increase in its debt burden, with total debt climbing to USD 1.9bn (USD 850m of which is related to the new terminal). We expect that the FY09 results in themselves will have little impact on the stock. However, during the company’s  presentation to analysts, Aeroflot’s CFO stated that by the end of 2010 the company will have acquired 6 state-owned airlines currently under the management of Rostechnollogii. Aeroflot also plans to sell a controlling stake in the new terminal to VEB in order to pay off an outstanding \\$900m loan from the bank, which VEB issued for construction of the terminal. Aeroflot also wants to retain a 25% +1 share to maintain some control over the terminal. We think these developments may attract additional investor interest.

Valuation and Action: Aeroflot trades on a 2011EV/EBITDA of 5.9x, implying a 28% discount to EM peers. We reaffirm our BUY recommendation for the stock.