Times of  India(26-06-2006)
http://epaper.timesofindia.com/

Worse not yet over for Jet Airways: analysts

New Delhi: Country’s largest domestic airline Jet Airways is still not completely out of the rough weather, despite steering clear of an “overvalued” merger deal with Air Sahara, the analysts said.
  
While Jet’s decision to call off the Air Sahara buyout deal is a positive development, the valuations are still not compelling, a global investment banking major said in its latest research report.
  
The cost related to the cancellation of the deal would also have an impact on the company’s earnings, said the bank, which has maintained its neutral outlook on the company, which was previously downgraded from a positive outlook in January when the deal was signed between Jet and Air Sahara.
  
Jet’s share price has plunged nearly 30% since the deal was signed in January, as most of the market analysts have consistently termed it as an overvalued deal and termed the cancellation as a “blessing in disguise” for Jet Airways. The market also welcomed the decision with a jump of more than 5% in the company’s share price on June 21, when the concrete reports came about an imminent cancellation of the deal. The reports of the deal entering a rough patch pushed the share price more than 17% till June 21 since bottoming out at Rs 600 on June 9.

Sahara’s implied valuation of nearly $500 million has been always termed on the higher side by the analysts, compared to Jet’s equity value of nearly $2.3 billion being five-times of this along with profitmaking operations.

However, Jet Airways is expected to lose nearly Rs 120 crore as commitment fee and might have to go through a stretched legal process to recover more than Rs 500 crore.
  
If Jet fails to recover advances made towards the Sahara deal, its earnings could be negatively impacted by as much as 6% over the next two fiscal years, analysts added. While, Jet posted a significant improvement in its FY05 operating profit over the year ago levels, its operating profit is estimated to plunge by nearly 30% in FY06.
  
While, a number of analysts consider Jet to be fairly valued at the current levels, they have also expressed concern over Jet’s falling market share and sector-specific factors like intensifying competition and rising fuel prices.
  
The competition is likely to further intensify for Jet with airlines like Kingfisher again vying for Air Sahara. Kingfisher is expected to have already expanded market share in the recent months while taking advantage of Jet’s involvement in the Sahara deal, industry said.