I have been thinking about this stock for a long time and though I had miss the chance but there is still a huge potential now that I've analysed a bit deeper.
LATAM Group Airline is the top airline in Latin America and it is the result of merging two top airlines, the Chilean LAN and the Brazilian TAM in 2010.It is a quality service airline, not a budget one. I personally loved it and for the europoors in the room, it felt like British Airways experience.
In COVID, the company filed for administration and a huge dillution happened in the process where debt holders were given shares in exchange of debt. That resulted in cleaning the debt from the balance sheet and having a huge equity base (of course, no good for old shareholders)Now, the company is back to business.
See the three main data below from the recent 2023-Q3 report.
- The nº of passengers transported is slightly above 3Q 2019 -> https://snipboard.io/60Hzli.jpg
- The debt has gone down from $7.5bn to $4bn -> https://snipboard.io/P4Q9rD.jpg
- And as per the income statement, you can see that it has gone through a hell of a 2 years post-lockdown and filing administration, and now is reporting highet benefits than pre-covid 3Q-2019 comparable period: -> https://snipboard.io/D1tOaJ.jpg
The company is valued similarly as it was pre-covid BUT with less debt on the balance sheet, that makes this airline less leverage, so more space to leverage and expand/grow their operations (more routes, aircrafts or even acquisition of small airlines via debt).
So, with the business volume back to prepandemic level but with less debt, the valuation should be much higher. Do we agree?
That's why, I beleive the stock has still a run from the current level. See how other airlines compare in valuation:https://companiesmarketcap.com/airlines/largest-airlines-by-market-cap/
As you can see, Ryan Air tops 1 (this was my main DD last year and I had presented to the audience of wsb who laughed at me… good profits I made), and LATAM is still ranking in the 22. A lot of airlines ranking above are not good performers as LATAM is.
The company trades in the OTC post-administration filing. But it does trade in Chilean main stock index as a bluechip that it is in the country and regional market.
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