Useful airlines valuation charts: Market Cap vs Expected Profit, Price/Book vs ROE, Price/Earnings vs EPS

1st March 2017, Asia Pacific - Useful charts for airlines valuation, sizing the airlines in terms of market capitalisation and net profit.  In summary, these charts show the valuation of the airlines in the Asia Pacific.  The listed airlines in the Asia Pacific region have an average market capitalization of US$3.9B and are expected to achieve an average expected net profit of US$305m based on consensus estimates in 2017. All the airlines with large market capitalization are based in North Asia with the exception of Singapore Airlines and Qantas.

Asia Pacific airlines valuation chart 1: Market Capitalisation (>US$5 billion) versus Expected Net profitAirlines Valuation Chart: Market Cap (>US$5 billion) vs Expected Net Profit of the airlines in the Asia Pacific

Asia Pacific airlines valuation chart 2: Market Capitalization (<US$5 billion) versus Expected Net profitAirlines Valuation Chart: Market Cap (<US$5 billion) vs Expected Net Profit of the airlines in the Asia Pacific

+ BENCHMARKING THE AIRLINES BASED ON P/B AND ROE

The most popular valuation metric used by investors for the Asia Pacific airlines tends to be Price/Book valuation. We therefore benchmark the airlines’ P/B valuations against their expected ROE based on consensus estimates in 2017.

In summary, the Asia Pacific airlines have an average P/B of 1.35x and are expected to achieve an average ROE of 12% in 2017 based on consensus estimates. Qantas, Cebu Air, AirAsia and Air China look more attractively valued among their sector peers while Juneyao, Spring Airlines, Jeju Air and Cathay Pacific look less attractively valued given their expected ROEs. 

Asia Pacific airlines valuation chart 3: Price/Book valuation versus Expected return on equityAirlines Valuation Chart: Price/Book vs Expected Return On Equity of the airlines in the Asia Pacific

+ BENCHMARKING THE AIRLINES BASED ON P/E AND EPS GROWTH

We find P/E a less useful valuation metric for the Asia Pacific airlines as many tend to turn loss-making during the industry downturns. However, many investors still find this metric useful as a general guide on how these airlines stack up against the rest of their portfolio. We therefore benchmark the airlines’ P/E valuations against their expected EPS growth (decline) based on consensus estimates in 2017. In summary, the Asia Pacific airlines have an average P/E of 11.8x and are expected to achieve an average EPS growth of 4% in 2017 based on consensus estimates.

Asia Pacific airlines valuation chart 4: Price/Earnings valuation versus Expected Earnings per Share growthAirlines Valuation Chart: Price/Earnings vs Expected EPS of the airlines in the Asia Pacific

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