Investors are sifting through the remnants of uprisings in parts of the Middle East and North Africa for a scuffed gem that could sparkle again. Air Arabia, the region's biggest low-cost carrier, has emerged as one diamond in the rough.
Even after falling 22 per cent since January 26, when protesters first took to the Cairo streets, the low-cost carrier's shares offer good long-term value, analysts say.
Akram Annous, a regional equity strategist at Al Mal Capital, said the company, based in Sharjah, was better placed for a jump in its share price compared with heavyweight stocks in property and banking. "If you're looking for catalyst-driven investing, when [the political situation across the Middle East] is resolved, this will be an area that will be attractive," Mr Annous said.
Air Arabia has two additional hubs in Egypt and Morocco, while a planned third hub in Jordan is on hold. Because of its exposure across the region, the airline has been hit hard by the political turmoil.
The carrier's stock fell last month to a record low after a poor set of first-quarter earnings, which the company partly attributed to increasing pressure on travel trends caused by regional uncertainty.
Net profit dipped 13.9 per cent to Dh42.7 million for the first quarter of the year, compared with the same quarter last year. But analysts think the worst is behind the company. "We believe regional unrest has now peaked along with oil prices and a drop in either will be beneficial for the stock," said Emad Mostaque, the chief strategist at Religare Capital Markets in London.
The stock has traditionally performed well at times of economic volatility as investors look to diversify their portfolio away from shares in banking and property shares. "The next cycle for property stocks may be a decade away when we know whether fundamental changes will take place in the sector," he added.
"But Air Arabia has that overhang that is tied to political and social events and once that starts to subside we'll have a snap back in the shares". Shares in the company yesterday slipped 0.9 per cent to 69 fils.