Transat AT Inc T.TRZ

Alternate Symbol(s): TRZBF

Industrials Airlines

Transat A.T. Inc. is a Canada-based integrated international tourism company specializing in holiday travel. The Company offers vacation packages, hotel stays and air travel under the Transat and Air Transat brands to some 60 destinations in more than 25 countries in the Americas and Europe. The Company's core business consists of a Canadian leisure airline, offering international and Canadian destinations, and is vertically integrated with its other services of holiday packages, distribution through a dynamic travel agency network and value-added services at travel destinations. It flies to international destinations in the Americas and Europe, and offers domestic and connecting flights within Canada, and carries some 5 million passengers every year. Its destination service offers a range of products for customers for outgoing tour operators, such as hospitality and representation, passenger transfers, excursions, tours, sports and other activities, and specialty services.

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Transat AT Inc > TD: target at 11,50$ (from 10,50$)

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Post by lb1temporaryon Apr 28, 2020 7:57am

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Post# 30960844

TD: target at 11,50$ (from 10,50$)

From TD airlines preview this morning:

Transat A.T.'s Q2/F20 earnings are expected to be secondary to the expected focus
on its cash position and potential acquisition by Air Canada. We believe that the longterm rationale behind an Air Canada/Transat A.T. transaction has strengthened due
to the impact of COVID-19 on the air travel industry. However, we remind investors
of our view that there is higher-than-usual regulatory risk, and that the short-term risk
of delays has increased, in our view, due to the temporary challenges being dealt
with by the two parties involved.

Details
Transat Focus and Outlook

We believe that investors should focus on Transat's Q2/20 cash, financial commitments for the balance of the year and indications of its cost structure and cash burn beyond Q1/20. Aside from this, we believe that Transat's Q2 earnings will provide limited value due to the potential acquisition by Air Canada and the overall uncertain environment.
The Competition Bureau report released in late-March unsurprisingly highlighted that a transaction between the two companies could potentially result in a substantial lessening or prevention of competition in select markets. The report will be considered as part of a broader public interest assessment by Transport Canada which is expected to be completed by May 2, 2020. Due to the current environment, we believe that there is increased short-term risk of a delay in the transaction, although the longer-term rationale is stronger today than when first announced, in our view.
Our $11.50 target price reflects Air Canada's current offer price of $18.00 adjusted lower by an amount equal to our estimate of the shortfall in FCF generated by Transat (due to the pandemic) relative to that which we assume Air Canada's offer price was based upon