Air Arabia PJSC rose the most in more than two weeks after Goldman Sachs Group Inc. raised its price estimate for the Middle East’s biggest no-frills airline on bets lower fuel costs and more passengers will spur profit.
The stock gained 2 percent, the most since Feb. 11, to 91 fils at the close in Dubai, bringing this month’s advance to 2.8 percent. The price marks a 25 percent discount to Goldman’s new 12-month target of 1.14 dirhams, up from 1.04 dirhams earlier. The bank also increased its 2013 profit estimate for the airline by 5 percent, according to a note received by e-mail yesterday.
“We forecast a marginal increase in ticket prices for the low-cost carrier, along with a 10 percent growth in passengers,” implying the highest seat-load factor since 2008, Dubai-based analysts Eyad Faraj and Matija Gergolet said in the note, which was dated Feb. 20. “With capacity additions and lower fuel costs” earnings before interest, taxes, depreciation and amortization are expected to improve, they said.
Passenger traffic through the United Arab Emirates has risen as the nation’s economy picks up and airlines based in the country add new destinations. Air Arabia last year started flights to nine more stops from its hub in Sharjah, a member of the U.A.E., including destinations in Iraq and Russia.
Passengers taking the carrier in 2012 increased 13 percent to a record 5.3 million, helping boost profit by 56 percent, Air Arabia said this month. U.S. crude oil has dropped 5.4 percent so far in February after a decline of 7.1 percent in 2012, according to data compiled by Bloomberg.
About 26 million shares of the airline were traded today, double the three-month daily average. The stock was the most traded on the benchmark DFM General Index, which gained 0.7 percent.
Air Arabia’s 2013 net income may increase 5 percent, according to the mean estimate of seven analysts compiled by Bloomberg. The shares trade at 10 times estimated 2013 earnings, compared with 15 times for Ryanair Holdings Plc, Europe’s largest low-cost carrier.
Five analysts recommend investors buy the shares, while six have a hold rating on the stock and one advises selling it, according to data compiled by Bloomberg.