Avolta (AO) | Buy | Bolt-on deal in Japan with agreed acquisition for DFS Okinawa

Research evidence excerpt

Avolta (AO) | Buy | Bolt-on deal in Japan with agreed acquisition for DFS Okinawa

Avolta Buy | Target Price: CHF55.00

Company description Management

Avolta is the largest airport retailer in the world with an estimated 20% share of Juan Carlos Torres, Chairman

the market. Its retail business is now complimented by a food service offering. Air Xavier Rossinyol, CEO

travel has remained resilient despite fragile consumer spending, with consumers Yves Gerster, CFO

prioritising travel and leisure over other goods and services. International Key shareholders

passenger growth is seen at c. 4% on average annually. The company is Free float 54.80%

committed to paying a third of FCF in dividends and using buybacks to maintain Edizione 22.20%

its 1-5-2x leverage goal. Advent 8.70% Richemont 4.90%

Investment case Valuation methodology

Avolta has a c. 20% share of the airport retail market. Air travel We focus on core EV/EBITDA (pre-IFRS 16 EV/EBITDA) and equity

remains resilient with passenger growth seen at c. 4% on free cash flow yield as well as its adjusted P/E for valuation.

average annually. Our DCF assumes 4% mid-term growth, 2% terminal growth,

Avolta can used its new expertise in food and beverages to win and a 9.0% WACC. It includes a 25% discount, reflecting

more concession contracts, opening up a large potential growth concerns about governance.

driver. Risks to our rating

We believe the company's medium-term targets are credible. Middle East conflict drags on for longer than expected.

Catalysts New business model of F&B and retail at airports does not work.

Airline and airport data. Long-term structural pressure on air travel from environmental

Regular quarterly reporting. concerns.

Its new F&B expertise could be demonstrated by concession

wins and expansion.