Gol’s share price rises on improving operational efficiency

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Dec. 1 2014, Published 6:25 p.m. ET

Share price trend

Gol trades as an American Depository Receipt (or ADR) in the New York Stock Exchange (or NYSE). ADRs represents securities of non-US companies that are traded in US stock exchanges and are denominated in US dollars. Gol’s share price fell by 70% in three years, from $15.38 on December 31, 2010, to $4.57 on December 31, 2013.

Part12_Gol_Share price

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2014 performance highlights

Gol’s stock gained ~21% during 2014 as its share price increased to $5.51 as of November 21, 2014. The share price increase reflects Gol’s improved operational efficiency during the nine months ending September 2014. The highlights of Gol’s performance in 2014 are:

  • Gol’s net revenue increased by 18% year-over-year to 7,336 million real
  • Unit passenger revenue rose from 15.34 centavos in 9M13 to 18.27 centavos in 9M14, driven by a 5.8% rise in yield
  • Total unit revenue is expected to increase by more than 10% in FY14
  • Load factor improved from 70% in 3Q13 to 78.3% in 3Q14
  • In spite of a 16% increase in unit cost, Gol’s EBIT margin increased to 4.6% in 9M14 from 1.7% in 9M13. Gol had a negative operating income in 3Q13, and EBIT is expected to range between 3% to 6% in FY14.
  • Adjusted gross debt by the last 12 months’ EBITDAR improved to 6.3x in 3Q14 from 10.9x in 3Q13
  • Unit cost excluding fuel decreased by 8.6% in 3Q14 to 11.3 centavos from 12.3 centavos in 2Q14

In 2Q14, Gol’s unit cost excluding fuel adjusted for stage length was 5.5 US cents, the lowest compared to its peers. LATAM’s (LFL) cost was 8.6 cents, Southwest’s (LUV) was 5.8 cents, Alaska’s (ALK) was 7.6 cents, Copa Holdings (CPA) was 6.2 cents, and JetBlue’s (JBLU) was 6.5 cents. ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN) hold stocks of the major US airlines.

International expansion

Gol expanded further into international markets. Its improved operational performance in FY14 will be further catalyzed if Brazil’s economy recovers as expected in FY15. However, Gol must reduce leverage in order to generate position net margins. Currently, Gol’s valuation is lower than its peers. Its forward EV/EBITDA multiple is 5.98x compared to LATAM’s 7.47x, Copa Holdings’ 8.54x, and Southwest’s 6.50x.

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