An Airline investment oppotunity
...9 0 1 2 2 2 2 Narrow body 11 0 11 1 2 1 2 2 3 Medium Wide body 0 0 0 1 1 1 1 1 2 Jumbo Wide body 5 0 5 0 0 1 1 2 1 Total 32 0 32 2 4 5 6 7 8 Aircraft purchased Outrights 0% 50% 50% 50% 50% 50% Tupolev 134 0 0 0 0 0 0 Yak 40 0 0 0 0 0 0 IL 18 0 0 0 0 0 0 Turboprop 0 1 1 1 1 1 Narrow body 0 1 1 1 1 2 Medium Wide body 0 1 1 1 1 1 Jumbo Wide body 0 0 1 1 1 1 Total 0 2 3 3 4 4 Challenge of Vietnam Airline Corporation - 9 - Purchase cost of aircraft purchased outright: PORJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 Discount Price Tupolev 134 0% 0 0 0 0 0 0 0 Yak 40 0% 0 0 0 0 0 0 0 IL 18 0% 0 0 0 0 0 0 0 Turboprop 0% 15,000 0 7,725 15,914 16,391 16,883 17,389 Narrow body 0% 37,000 0 38,110 19,627 40,431 41,644 64,340 Medium Wide body 0% 82,500 0 42,488 43,762 45,075 46,427 95,640 Jumbo Wide body 0% 135,000 0 0 71,611 73,759 151,944 78,251 Total 0 88,323 150,913 175,656 256,897 255,620 Purchase cost inflation index 3.0% 100% 103% 106.09% 109.27% 112.55% 115.93% Challenge of Vietnam Airline Corporation - 10 - Purchase cost of aircraft leased: PORJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 Tupolev 134 0 0 0 0 0 0 Yak 40 0 0 0 0 0 0 IL 18 0 0 0 0 0 0 Turboprop 0 7,725 15,914 16,391 16,883 17,389 Narrow body 0 38,110 19,627 40,431 41,644 64,340 Medium Wide body 0 42,488 43,762 45,075 46,427 95,640 Jumbo Wide body 0 0 71,611 73,759 151,944 78,251 Total 0 88,323 150,913 175,656 256,897 255,620 Challenge of Vietnam Airline Corporation - 11 - PROJECTION SOLUTION Operating summary HIST 1991 HIST 1992 HIST 1993 HIST 1994 PROJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 ASKs 768,757 1,439,090 2,197,736 3,080,888 3,837,564 4,898,826 6,345,012 8,173,247 10,786,699 14,398,146 % change 87.2% 52.7% 40.2% 24.6% 27.7% 29.5% 28.8% 32.0% 33.5% Passenger Revenue 38,231 90,135 132,680 195,872 252,550 322,040 414,679 528,227 685,842 888,620 % change 135.8% 47.2% 47.6% 28.9% 27.5% 28.8% 27.4% 29.8% 29.6% Cargo Revenue 3,838 8,610 12,355 16,411 22,730 30,594 41,468 55,464 75,443 102,191 % change 124.3% 43.5% 32.8% 38.5% 34.6% 35.5% 35.5% 38.5% 36% Other Revenue 4,968 6,500 9,235 16,290 21,004 26,733 34,487 43,931 57,039 73,903 % change 30.8% 45.1% 76.4% 28.9% 27.5% 28.8% 27.4% 29.8% 29.6% Total Revenue 47,037 105,245 154,270 228,573 296,283 379,417 490,634 627,622 818,324 1,064,715 % change 123.7% 46.6% 48.2% 29.6% 28.1% 29.3% 27.9% 30.4% 30.1% Cargo/Passenger Revenue 10.0% 9.6% 9.3% 8.4% 9% 9.5% 10% 10.5% 11% 11.5% Other/Passenger Revenue 13.0% 7.2% 7% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% EBITDAR is Earnings before Interest, Taxes, Depreciation, Amortization and Rent EBITDAR 17,036 54,850 82,905 120,148 143,800 180,328 227,248 281,248 351,510 435,851 % change 222.0% 51.1% 44.9% 19.7% 25.4% 26% 24% 24.8% 24% EBITDAR margin 36.2% 52.1% 53.7% 52.6% 48.5% 47.5% 46.3% 44.9% 43% 40.9% EBITDAR Coverage 4.56 2.16 1.82 1.74 1.57 1.51 1.44 1.39 1.35 1.37 EBITDAR Coverage is EBITDAR divided by interest Expense plus Current Portion of LTD plus rental Expense EBITD 13,304 29,675 38,385 52,012 62,182 86,895 120,162 156,048 201,201 256,246 % change 123.1% 29.4% 35.5% 19.6% 39.7% 38.3% 29.9% 24.8% 24% EBIT Margin 28.3% 28.2% 24.9% 22.8% 21% 22.9% 24.5% 24.9% 24.6% 24.1% Margins are nominal value divided by total revenues EBIT 9,654 20,745 27,245 36,950 45,889 63,366 88,719 111,691 141,549 178,035 Challenge of Vietnam Airline Corporation - 12 - % change 114.9% 31.3% 35.6% 24.2% 42.4% 35.7% 25.9% 26.7% 25.8% EBIT Margin 20.5% 19.7% 17.7% 16.2% 15.5% 17.2% 18.1% 17.8% 17.3% 16.7% Interest expense 0 255 916 1,050 3,480 11,162 22,743 30,074 48,644 60,888 Net Income 5,284 11,249 14,371 17,347 19,766 25,287 29,668 32,169 36,756 45,082 CMB Leverage 0.80 1.34 2.94 2.78 2.64 4.08 5.69 6.85 8.03 8.54 CMB Leverage in total liabilities less deferred liabilities divided by total Equity Balance Sheet Debt 0 19,599 17,053 39,278 46,915 223,269 503,453 803,938 1,187,138 1,531,682 Off-Balance Sheet Debt @-8x Aircraft rent 29,856 201,400 356,160 545,088 652,948 747,463 856,682 1,005,480 1,202,473 1,436,840 Total Debt 29,856 220,999 373,213 584,366 699,863 970,733 1,360,135 1,809,418 2,389,611 2,968,523 Total Debt/EBITDAR 1.75 4.0 4.5 4.9 4.9 5.4 6.0 6.4 6.8 6.8 After tax Operating cash-flow – FP 20,179 25,511 32,409 36,059 40,270 46,175 48,767 54,074 62,762 After tax Operating cash-flow /FP 80.13 28.85 31.87 11.36 3.27 2.23 1.78 1.59 1.52 After tax Operating cash-flow /(FP+Div) 80.13 28.85 31.87 11.36 3.27 2.23 1.78 1.59 1.52 Challenge of Vietnam Airline Corporation - 13 - INCOME STATEMENT Income Statement ($000’s) HIST 1992 HIST 1993 HIST 1994 PROJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 Operating Revenues: Passenger 90,135 132,680 195,872 252,550 322,040 414,679 528,227 685,842 888,620 Cargo 8,610 12,355 16,411 22,730 30,594 41,468 55,464 75,443 102,191 Others 6500 9,235 16,290 21,004 26,783 34,487 43,931 57,039 73,903 105,245 154,270 228,573 296,283 379,417 490,634 627,622 818,324 1,064,715 Operating Expenses Wages and salaries 2,950 3,760 5,942 8,290 11,852 16,886 23,926 34,734 51,000 Aircraft Fuel 17,785 24,310 31,615 36,623 44,414 55,799 71,158 93,912 125,354 Sale/Advertising 4,597 7,960 13,018 10,102 16,102 20,734 26,411 34,292 44,431 Ground Operations 5,317 7,955 14,626 20,040 28,140 40,092 56,809 82,471 121,091 Passenger service 4,506 7,297 13,215 17,780 23,892 31,721 41,833 54,812 71,880 Maintenance 7,325 9,327 13,753 39,341 48,708 64,398 82,010 108,511 136,984 Other flight exps. 3,850 4,750 7,677 10,041 13,458 18,303 24,755 31,304 48,079 Rent expense 25,175 44,520 68,136 81,619 93,433 107,085 125,685 150,309 179,605 Genera Admind. 4,065 6,006 8,579 10,267 12,524 15,454 18,986 23,777 30,045 EBITD 29,675 38,385 176,561 234,102 292,523 370,472 471,574 617,124 808,469 Depreciation 8,930 11,140 15,062 16,292 21,529 31,443 44,357 59,652 78,211 EBIT 20,745 27,245 36,950 45,889 65,366 88,719 111,691 141,549 178,035 Interest expense 255 916 1,050 3,480 11,162 22,743 35,074 48,644 60,888 Less: Discount on Debt 0 0 0 0 0 0 0 0 0 Interest expense – DND 0 0 0 0 0 0 0 0 0 Foreign Currency (Gain)/Loss 0 0 0 0 0 0 0 0 0 Challenge of Vietnam Airline Corporation - 14 - Sale of ST Investment (Gain)/Loss 0 0 0 0 0 0 0 0 0 Financial (Income)/Loss 0 0 0 0 0 0 0 0 0 Mics. Expense (Income) 0 0 0 0 0 0 0 0 0 Income before tax 20,490 26,329 35,900 42,409 54,204 65,976 76,617 92,905 117,147 Revenue Taxes 4,210 6,171 9,143 11,851 15,177 19,625 25,105 32,733 42,589 Residual Taxes 210 198 189 189 189 189 189 189 189 Profit Taxes 4,821 5,589 9,221 10,602 13,551 16,494 19,154 23,226 29,287 Total taxes expenses (credit) 9,241 11,958 18,553 22,643 28,917 36,308 44,448 56,148 72,064 NPBUI 11,249 14,371 17,347 19,766 25,287 29,668 32,169 36,756 45,082 Sale of Assets (Gain)/Loss 0 0 0 0 0 0 0 0 0 Unusual Operation (Gain)/Loss 0 0 0 0 0 0 0 0 0 NPAUI 11,249 14,371 17,347 19,766 25,287 29,668 32,169 36,756 45,082 Investment in Labor Fund 0 0 0 0 0 0 0 0 0 Investment in Bonus Fund 0 0 0 0 0 0 0 0 0 Forex Translation Adjustment 0 0 0 0 0 0 0 0 0 Change in Retained Earning 11,249 14,371 17,347 19,766 25,287 29,668 32,169 36,756 45,082 Reconciliation 0 0 0 0 0 0 0 0 0 Challenge of Vietnam Airline Corporation - 15 - BALANCE SHEET ($000’S) ASSETS HIST 1992 HIST 1993 HIST 1994 PROJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 Cash 47,844 26,528 34,279 40,000 42,336 102,880 179,226 354,367 493952 Other CA 145,477 114,393 135,346 197,621 253,071 327,253 418,624 545,822 710,165 Total current assets 193,321 140,922 169,625 237,621 295,407 430,133 597,849 900,189 1,204,117 Net Plant 36,890 45,541 77,252 72,209 194,594 379,132 590,772 848,934 1,113,142 Advances 0 0 0 0 71,350 128,668 164,159 138,035 107,360 Other net NCA 0 0 0 0 0 0 0 0 0 Total 230,210 186,463 246,876 309,930 561,352 937,933 1,352,781 1,887,158 2,424,619 LIABILITIES Short term Debt 0 0 0 0 0 0 0 0 0 CPLTD 0 0 0 6,546 14,936 27,759 42,334 60,531 78,638 Other CL 112,719 122,111 142,220 177,770 227,650 294,381 376,573 490,995 638,829 Total current liabilities 112,719 122,111 142,220 184,316 242,586 322,139 418,908 551,526 717,467 Debt – R/C 0 0 0 0 0 0 0 0 0 Debt – Long Term 0 0 0 0 0 0 0 0 0 Debt – New Debt need 19,599 17,053 39,278 32,732 208,334 475,694 761,604 1,126,607 1,453,044 Deferred taxes 0 0 0 0 0 0 0 0 0 Deferred Sale – Leaseback Gains 0 0 0 0 0 0 0 0 0 Reserves & Deferred Credits 0 0 0 0 0 0 0 0 0 Capital Lease Obligations 0 0 0 0 0 0 0 0 0 Total liabilities 132,318 139,164 181,498 224,685 450,920 797,833 1,180,512 1,678,133 2,170,511 Capital Stock 0 0 0 0 0 0 0 0 0 Challenge of Vietnam Airline Corporation - 16 - Paid-in capital 73,314 28,489 5,711 5,711 5,711 5,711 5,711 5,711 5,711 Other Reserve Accounts 24,579 18,810 21,959 21,959 21,959 21,959 21,959 21,959 21,959 Cumulative Translation & Adjustment 0 0 0 0 0 0 0 0 0 Retained Earnings Opening 0 0 0 37,708 57,474 82,762 112,429 144,598 181,355 Plus: Net income 0 0 0 19,766 25,287 29,668 32,169 36,756 45,082 Plus: Other Adjustment 0 0 0 0 0 0 0 0 0 Plus: Forex translation 0 0 0 0 0 0 0 0 0 Retained Earning Closing 0 0 37,708 57,474 82,762 112,429 144,598 181,355 226,437 97,893 47,299 65,379 85,145 110,432 140,100 172,269 209,025 254,108 Reconciliation 230,210 186,463 246,877 309,830 561,352 937,933 1,352,781 1,887,158 2,424,619 Challenge of Vietnam Airline Corporation - 17 - CASH FLOW Cash Flow HIST 1993 HIST 1994 PROJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 NPAUI 14.371 17.347 19.766 25.287 29.668 32.169 36.756 45.082 + Interest expense 916 1.050 3.480 11.162 22.743 37.074 48.644 60.888 + Depreciation 11.140 15.062 16.292 21.529 31.443 44.357 59.652 78.211 + Foreign Exchange Loss 0 0 0 0 0 0 0 0 + Sale of ST Investment (Gain)/Loss 0 0 0 0 0 0 0 0 + Financial (Income)/ Loss 0 0 0 0 0 0 0 0 + Mices. & Unusual Expense 0 0 0 0 0 0 0 0 After-Tax Operation Cash Flow 26.427 33.459 39.539 57.978 83.854 111.599 145.053 184.182 - Change in Current Asset 31.084 (20.953) (62.275) (55.450) (74.182) (91.371) (127.199) (164.343) + Chang in current liabilities 9.392 20.109 35.550 49.880 66.730 82.193 114.421 147.834 Chang in Working Capital 40.476 (843) (26.725) (5.570) (7.452) (35.491) (26.124) (16.508) Cash after current operations 66.903 32.616 12.814 52.408 76.402 102.421 132.276 167.674 - Net Plant Expenditures (19.792) (46.773) (11.250) (143.914) (215.981) (255.997) (317.814) (342.419) - Change in Advances 0 0 0 (71.350) (57.318) (35.491) 26.124 30.674 - Change in other NCA 0 0 0 0 0 0 0 0 + Change in other NCL 0 0 0 0 0 0 0 0 Challenge of Vietnam Airline Corporation - 18 - + Chang in Deferred Taxes 0 0 0 0 0 0 0 0 + Change in Def. Sale-Lease back gains 0 0 0 0 0 0 0 0 + Chang in reserves & Def. Credits 0 0 0 0 0 0 0 0 - Foreign Exchange Loss 0 0 0 0 0 0 0 0 - Sale of ST investment (gain)/loss 0 0 0 0 0 0 0 0 - Financial (Income)/loss 0 0 0 0 0 0 0 0 - Mics. & unusual Expense 0 0 0 0 0 0 0 0 Cash after Long-term use 47.111 (14.157) 1.564 (162.856) (196.896) (189.067) (159.414) (144.071) - Interest Expense (916) (1.050) (3.480) (11.162) (22.743) (35.074) (48.644) (60.888) - CPLTD 0 0 0 (6.546) (14.936) (27.759) (42.334) (60.531) Financing payments (916) (1.050) (3.480) (17.708) (37.679) (62.832) (90.979) (121.420) Cash after financing payments 46.195 (15.207) (1.917) (180.565) (234.575) (251.899) (250.393) (265.491) + Change in STD 0 0 0 0 0 0 0 0 + Chang in Debt (2.546) 22.225 7.637 182.901 295.119 328.245 425.534 405.075 +/- Change in Capital Stock 0 0 0 0 0 0 0 0 +/- Change in APIC (44.825) (22.778) 0 0 0 0 0 0 +/- Change in Revaluation (5.769) 3.150 0 0 0 0 0 0 +/- Change in Cumm. Adjustments 0 0 0 0 0 0 0 0 - Other change in R.E 0 0 0 0 0 0 0 0 Challenge of Vietnam Airline Corporation - 19 - - Dividends 0 0 0 0 0 0 0 0 Change in Cash Reconciliation (6.945) (12.610) 5.721 2.336 60.544 76.345 175.141 139.585 After-tax operating cash Flow – FP 25.511 32.409 36.059 40.270 46.175 48.767 54.074 62.762 After-tax operating cash Flow/FP 28.58 31.87 11.36 3.27 2.23 1.78 1.59 1.52 After-tax operating cash Flow/(FP+Dividend) 28.58 31.87 11.36 3.27 2.23 1.78 1.59 1.52 Challenge of Vietnam Airline Corporation - 20 - FACT SHEET HIST 1991 HIST 1992 HIST 1993 HIST 1994 PROJ 1995 PROJ 1996 PROJ 1997 PROJ 1998 PROJ 1999 PROJ 2000 ROE (ROSxATOxALEV) 4.3% 11.5% 30.4% 26.5% 23.2% 22.9% 21.2% 18.7% 17.6% 17.7% ROS (Net profit/Total Revenues) 11.23 10.69 9.32 7.59 6.67 6.66 6.05 5.13 4.49 4.23 ATO (Total revenue/Total Asset) 0.22 0.46 0.83 0.93 0.96 0.68 0.52 0.46 0.43 0.44 ALEV(Total Asset/Total Equity) 1.76 2.35 3.94 3.78 3.64 5.08 6.69 7.85 9.03 9.54 Profitability Total Revenue 47,037 105,245 154,270 228,573 296,283 379,417 490,634 627,622 818,324 1,064,715 % change 123.7% 46.6% 48.2% 92.1% 28.1% 29.3% 27.9% 30.4% 30.1% Operating Expense/Total revenue 71.7% 71.8% 75.1% 77.2% 79% 77.1% 75.5% 75.1% 75.4% 75.9% EBITD margin 28.3% 28.2% 24.9% 22.8% 21% 22.9% 24.5% 24.9% 24.6% 24.1% NPAUI/Total revenue 11.2% 10.7% 9.3% 7.6% 6.7% 6.7% 6% 5.1% 4.5% 4.2% Dividends/NPAUI 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Interest expense/Adjusted Funded Debt n/a 5% 3.7% 10.9% 8.3% 6.3% 5.4% 4.9% 4.5% Taxes/Net Profit before tax 45.3% 45.1% 45.4% 51.7% 53.4% 0.3% 0.3% 0.2% 0.2% 0.2% Challenge of Vietnam Airline Corporation - 21 - Assets Efficiency Working capital (Other C.A-Other CL) (26,549) 32,758 (7,718) (6,874) 19,851 25,421 32,872 42,051 54,828 71.336 % change -223.4% -123.6% -10.9% -357.2% 28.1% 29.3% 27.9% 30.4% 30.1% Working capital/Total revenue -56.4% 31.1% -5% -3% 6.7% 6.7% 6.7% 6.7% 6.7% 6.7% Liquidity & Leverage Current ratio 1.52 1.72 1.15 1.19 1.29 1.22 1.34 1.43 1.63 1.68 Coverage ratio 1.52 1.46 1.01 0.93 1.06 0.66 0.54 0.51 0.54 0.55 CMB leverage 0.80 1.35 2.94 2.78 2.64 4.08 5.69 6.85 8.03 8.54 Total Liabilities/Net worth 0.80 1.35 2.94 2.78 2.64 4.08 5.69 6.85 8.03 8.54 Ca...