Investors eye undervalued Air Arabia

Air Arabia said yesterday that it has taken delivery of its sixth A320 aircraft this year. The carrier received its latest A320 at the Airbus facility located in Toulouse, France.

The airline is one of the leading low-cost carriers in the Middle East and North Africa with a network of 82 destinations.

Listed on the Dubai Financial Market, Air Arabia shares have risen about 34 per cent in the past six months, as investors snapped up shares considered cheap.

The shares have moved from a low of 59 fils on June 27 to trade at 79 fils yesterday.

The airline is trading at 9 times earnings, compared to 12 times earnings for the sector in the UAE.

"People are buying the stock because it's trading below its par value," said Wadah Al Taha, the chief investment officer at Al Zarooni Group, an investment company in Dubai.

"For the ordinary retail investors, they are not looking at valuation or future revenue, but with the expectation of a decent dividend, which has averaged between 7 per cent and 10 per cent in the past three years."

Air Arabia has now received 14 of the 44 A320 aircraft it ordered from Airbus in 2007.

The delivery of the 44 new aircraft will be completed by 2016, and will more than double the size of Air Arabia's fleet.

halsayegh@thenational.ae