COPA HOLDINGS Balance Sheets

Description Copa is the best airline in the world; Copa’s competitive advantage is durable due to the unique location of Panama City and the network effect of the hub-and-spoke model Copa has had an eight-year streak of exceptionally bad luck; the next eight years are, in a base case, likely to be much better Valuation is attractive – I can see 1-year upside of ~40% (10x 2025 EPS) and 5-year upside of 100% (15% BVPS compounding and 2x 2028 BVPS) Risks abound, but they are manageable and compensated by upside cases Part 1: Copa is the best airline in the world; Copa’s competitive advantage is durable due to the unique location of Panama City and the network effect of the hub and spoke model. download financial statements Option Pricing Calculator stock price calculator While airlines are notoriously bad businesses (low barriers to entry, high competition, high capital intensity, cyclical demand), Copa has generated more value through the cycle than any other airline in the world: Copa Ryanair Delta American Avianca 2005 - 2023 BVPS compounding (dividend adjusted) 15% 10% Negative Negative Negative *Methodological note: I adjust BVPS in each period up assuming dividends can be reinvested at 2x P/B. This is a realistic assumption in the sense that Copa is often trading near 2x P/B, and an investor can literally use a dividend to buy more book value. A 15% BVPS compounding is consistent, for example, with 19% ROE and 40% dividend payout ratio (19%*40%/2 + 19%*60% = 15%). This is, in fact, what I think Copa’s long-run financial algorithm is, and it implies 11% growth in revenues and book value through time, 19% ROE, and 40% payout ratio (or share repurchases). I have selected the airlines in the above table somewhat randomly – I could have chosen dozens more. Few airlines have grown book value per share through the cycle. And a very small number have grown BVPS at an attractive rate >10% for over 15 years (Alaska Air and Copa are the only two I know of globally). Even the highly-esteemed Ryanair, with all its innovation and operational excellence, has through-cycle returns far inferior to Copa. Copa’s numbers evidence a great business. So what accounts for Copa’s high returns? Copa operates from Tocumen International Airport, in Panama City, which was basically designed for (and in large part by) Copa. Copa accounts for 80% of Tocumen flights. Tocumen, compared to nearby hubs such as Bogota and San Salvador, has the benefit of friendly and stable government, central location between North and South America, good weather for flying, and sea level runways, which lowers the cost of jet fuel at takeoff. Quoting a 2016 VIC writeup, “at Tocumen, Copa aggregates fragmented traffic from multiple destinations, serving many city pairs that lack sufficient demand to justify point-to-point service. For example, 76% of the markets served by Copa have 20 or less passengers per day each way (PPDEW). On 73% of Copa’s flights, the number of passengers sharing the same final destination is less than 20.” This is a network effect advantage, and cannot be eroded by marginally adding capacity because one needs the whole network to be able to serve city pairs with thin demand. Panama has favorable labor laws, labor markets, and tax structure for Copa to operate at quite a low cost given service / product (low costs while offering full-service experience). So we have strong evidence that Copa will continue to generate good returns: Copa’s history of high through-cycle book value compounding Conceptually compelling explanations for Copa’s competitive advantage Alternatively, a VIC short pitch from 2021 argued that increasing ULCC competition and longer-range narrow-body planes would erode Copa’s competitive advantage. I believe this to be unlikely for several reasons: No hub is as well developed as Tocumen, and therefore no hub can serve thin routes efficiently as Copa No hub has the structural advantages of Tocumen as discussed above (friendly government, sea level, location, weather) ULCC competition is worthy of concern, but it’s also somewhat beneficial that Copa is increasingly the only full service carrier in the region; some passengers prefer a full service experience More often-than not, high return business stay as high return businesses Lastly, I suggest that the results since the above-mentioned short write-up speak for themselves in that Copa has delivered outstanding operating margins, which are also superior vs. all peers: Copa Ryanair Delta American Avianca TTM EBIT margin 22% 18% 9% 9% 12% Part 2: Copa has had an eight-year streak of exceptionally bad luck; the next eight years are, in a base case, likely to be much better: Let’s review the past eight years for Copa: 2015: Copa lost > $400M trapped in Venezuela and devalued into worthless Bolivars 2015 / 2016: Copa suffered due to the deep recession in South America, especially in Brazil; Brazilian GDP fell ~7% over the two years, far worse than in the 2008/2009 financial crisis (when GDP was flat for 2009, but quite healthy in 2008 and 2010); Brazilian and Colombian currencies deteriorated 2018: Copa discovered and disclosed that they had been under-accruing depreciation on their fleet for over ten years and took a 1x charge of nearly $200M 2020: COVID shut down air travel; Copa assumed a dilutive equity raise (convertible debt) just at the bottom of the market and their stock price I’m not saying that this sequence of challenges represents a once-in-100-years kind of adverse circumstances for an airline. However, this is a string of adverse events that should be considered bottom quartile type of conditions. Some of the conditions could have been avoided through better management (Venezuela cash and under-accruing of depreciation), and some were truly unpredictable (COVID). Nancy Pelosi Stock Trades Tracker Congress Stock Trades Tracker As a result of different periods with different conditions, we can see that Copa’s book value compounding can be separated into very different periods: 2005 - 2014 2014 - 2021 2021 - 2023 BVPS compounding 29% -4% 29% When conditions are unfavorable, Copa survives and muddles through. When conditions are favorable, Copa prints money. These periods, respectively, can last long periods and swing unpredictably. Importantly, however, these periods are self correcting through the capital cycle: if things get bad enough, they trigger financial stress amongst Copa’s over-levered peers, which results in bankruptcy (sometimes), lower capacity, and more favorable conditions. Furthermore, Copa has the financial strength and business model strength to emerge healthy from these challenging periods, as they did even through all the catastrophes of the 2014 - 2021. The largest single-year hit to their book equity came in 2015 and 2021 (both about -30%), and in both cases I found bankruptcy highly unlikely at the time. I don’t feel brazen enough to predict either that the 2023 favorable conditions will persist, and nor that the 2015/2016/2020 woes will return. Rather, I model a middle ground, on which I find valuation attractive. Part 3: Valuation is attractive I can see 1-year upside of ~40% and 5-year upside of 100%: Considering valuation in two different ways, I am struck in both cases that valuation is attractive: Valuation is attractive on the basis that Copa trades at 2.0x P/B. If Copa continues to grow adjusted book value per share (with dividends reinvested) at 2x P/B, one’s book value will double in just five years, and one’s investment at 2x P/B today would be 1x 2028 book value. One’s investment will outperform in this scenario (Copa would likely trade over 2x P/B in five years under this scenario, meaning that one’s investment would double in five years) Valuation is attractive in that Copa trades for 6.0x 2023 EPS (which I assume has cyclically high margins) and 6.9x 2025 EPS (which I assume has normal margins of 16%). I think Copa will trade up to 10x 1-year forward earnings, implying upside to $140 by year-end 2024. 2023 2024 2025 Revenue $3,411 $3,923 $4,315 % growth 15% 10% % EBIT margin 23% 0.15% 0.15% EPS $16.29 $12.18 $14.01 P/E 6.0 8.0 6.9 Part 4: Risks abound, but they are manageable and compensated by upside cases: The largest risk today is that Copa’s competitors, especially Avianca, but also to some extent Latam Airlines, Viva Air, and others are adding capacity rapidly in Copa’s markets. Demand is very robust in Copa’s markets, evidenced by their above-normal 23% 2023 operating margins. Consequently, everyone is adding capacity. This cycle is rather normal, and can persist for many years. In the 2005 - 2014 period, for example, capacity growth by Copa and peers was low-double-digit, and yet demand kept pace, with Copa earning excellent returns. Latin American air travel is underpenetrated and can grow quickly. short interest api stock value calculator Black Scholes Calculator Alternatively, if demand falls or flatlines, margins will fall hard. The good news is that supply can also react quickly, especially given that Copa’s competitors are over-levered and have high borrowing costs. Unless global demand suffers a simultaneous shock, competitors’ planes can be sold to carriers in other regions. These cycles of demand and supply, moreover, are rather normal, and not likely to be long-lived. Other risks are easy to imagine just by studying Copa’s history (political instability, natural disasters, pandemics, etc). However, Copa’s history makes clear that periods of stability are slightly more likely and very, very profitable. At 6x 2023 P/E, I’m willing to take the risk on the market conditions.Copa航空公司（Copa）是全球顶尖航司；其竞争优势具有持久性，这源于巴拿马城独特的地理位置，以及枢纽辐射式航线网络（hub-and-spoke model）的网络效应。 Copa曾连续八年遭遇极为不利的经营状况；在基准情景下，未来八年的经营表现大概率将显著改善。 估值颇具吸引力——预计1年上涨空间约40%（对应2025年每股收益（Earnings Per Share，EPS）的10倍估值），5年上涨空间可达100%（基于15%的每股账面价值（Book Value Per Share，BVPS）复合增速，以及2028年BVPS的2倍估值）。 尽管存在诸多风险，但这些风险均处于可控范围，且上涨情景足以覆盖风险带来的潜在损失。 --- ### 第一部分：Copa航空公司（Copa）是全球顶尖航司；其竞争优势具有持久性，源于巴拿马城独特的地理位置与枢纽辐射式航线网络的网络效应。 下载财务报表 期权定价计算器 股价计算器 尽管航空业向来被视为糟糕的赛道——准入门槛低、竞争激烈、资本密集度高且需求具有周期性，但Copa在全周期内创造的价值远超全球其他航空公司： |航司|2005-2023年BVPS复合增速（经股息调整）| |---|---| |Copa|15%| |瑞安航空（Ryanair）|10%| |达美航空（Delta）|负值| |美国航空（American）|负值| |哥伦比亚航空（Avianca）|负值| *方法学说明：本文假设股息可按2倍市净率（Price-to-Book Ratio，P/B）进行再投资，据此对各期BVPS进行向上调整。鉴于Copa的股价通常接近2倍P/B，投资者可直接利用股息增持账面价值，因此该假设具备现实合理性。例如，15%的BVPS复合增速与19%的净资产收益率（Return on Equity，ROE）及40%的股息支付率相匹配（19%*40%/2 + 19%*60% =15%）。这正是我认为的Copa长期财务运行逻辑，其隐含的长期增速为：营收与账面价值年均增长11%、ROE为19%、股息支付率（或股票回购比例）为40%。 上述表格中的航司选择带有一定随机性，我本可以纳入更多标的。能够在全周期内实现每股账面价值增长的航司寥寥无几，而连续15年以上实现10%以上可观BVPS复合增速的企业更是屈指可数（据我所知，全球范围内仅有阿拉斯加航空与Copa两家）。即便以创新与运营能力著称的瑞安航空，其全周期回报率也远低于Copa。Copa的财务数据足以证明其具备卓越的商业模式。 那么，Copa的高回报率源于何处？ Copa以巴拿马城的托库门国际机场（Tocumen International Airport）为运营枢纽，该机场几乎专为Copa打造（且很大程度上由Copa参与建设）。Copa的航班量占托库门国际机场总航班量的80%。与波哥大、圣萨尔瓦多等周边枢纽相比，托库门机场拥有诸多优势：政府政策友好且稳定、地处南北美洲中心地带、飞行气象条件优良，以及海平面跑道——后者可降低起飞阶段的航空燃油成本。 援引2016年价值投资俱乐部（ValueInvestingClub，VIC）的研报内容：“在托库门机场，Copa整合了来自多个目的地的零散客流，为众多需求不足以支撑点对点直飞航线的城市对提供服务。例如，Copa服务的市场中，76%的航线单程每日乘客数（Passengers Per Direction Each Way，PPDEW）不超过20人；在Copa73%的航班上，同一目的地的乘客数量不足20人。”这一网络效应优势难以通过小幅增加运力被侵蚀，因为只有依托完整的航线网络，才能满足低需求城市对的运输需求。 巴拿马的劳动法、劳动力市场与税收结构均对Copa十分友好，使其能够在提供全服务体验的同时，维持相对较低的运营成本。 因此，我们有充分证据表明Copa将持续实现可观的回报率： 1. Copa在全周期内实现高BVPS复合增速的历史表现 2. Copa竞争优势具备理论层面的坚实支撑 此外，价值投资俱乐部（VIC）2021年的一份空头研报认为，超低成本航空公司（Ultra Low Cost Carrier，ULCC）竞争加剧以及远程窄体客机的普及，将削弱Copa的竞争优势。但我认为这种情况不太可能发生，理由如下： 1. 没有任何枢纽的成熟度能与托库门机场比肩，因此无法有其他枢纽能像Copa一样高效服务低需求航线 2. 没有任何枢纽具备前文提及的托库门机场的结构性优势（友好的政府政策、海平面跑道、地理位置与优良气象） 3. ULCC的竞争确实值得警惕，但Copa逐渐成为该区域唯一的全服务航司，这在一定程度上反而是利好——部分乘客更偏好全服务的乘机体验 4. 高回报率的商业模式通常能够维持其竞争地位 最后，自上述空头研报发布以来的业绩足以证明一切：Copa实现了出色的营业利润率，且该指标在同行中遥遥领先： |航司|过去十二个月息税前利润率（TTM EBIT margin）| |---|---| |Copa|22%| |瑞安航空（Ryanair）|18%| |达美航空（Delta）|9%| |美国航空（American）|9%| |哥伦比亚航空（Avianca）|12%| --- ### 第二部分：Copa曾连续八年遭遇极为不利的经营状况；在基准情景下，未来八年的经营表现大概率将显著改善： 我们不妨回顾一下Copa过去八年的经历： - 2015年：Copa因委内瑞拉资产被冻结，其资产因玻利瓦尔贬值沦为废纸，损失超4亿美元 - 2015-2016年：受南美地区深度衰退影响，尤其是巴西经济疲软；巴西两年间GDP累计下滑约7%，跌幅远超2008-2009年金融危机期间（2009年GDP持平，2008年与2010年经济表现健康）；巴西与哥伦比亚货币大幅贬值 - 2018年：Copa发现并披露，其过去十余年未足额计提机队折旧费用，因此计提了近2亿美元的一次性减值损失 - 2020年：新冠疫情导致航空出行停摆；Copa在市场与股价处于底部时进行了摊薄性股权融资（可转换债券） 我并非说这一系列挑战对航司而言是百年一遇的极端不利状况，但它们无疑属于最差四分之一的糟糕情景。其中部分问题本可通过更完善的管理规避（如委内瑞拉资产风险与折旧计提不足），而另一些则完全不可预测（如新冠疫情）。 南希·佩洛西股票交易追踪器 国会股票交易追踪器 受不同经营周期的影响，Copa的BVPS复合增速可分为截然不同的阶段： |周期|BVPS复合增速| |---|---| |2005-2014年|29%| |2014-2021年|-4%| |2021-2023年|29%| 当经营环境不利时，Copa能够挺过难关并逐步恢复；当环境向好时，Copa则能实现丰厚盈利。这些周期往往持续较长时间且走势难以预测，但重要的是，资本周期会自发修正这些波动：当形势足够糟糕时，会引发Copa高杠杆同行的财务压力，进而导致部分企业破产、运力收缩，最终改善行业环境。此外，Copa具备充足的财务实力与稳固的商业模式，能够从艰难周期中恢复元气——正如其在2014-2021年的一系列灾难中所展现的那样。2015年与2021年是其账面权益遭受最大单次冲击的年份（跌幅均约30%），但在当时我均认为其破产概率极低。 我不敢贸然断言2023年的向好态势会持续，也无法预测2015、2016与2020年的困境是否会重演。因此，我采用中性情景进行建模，在此情景下，我认为Copa的估值颇具吸引力。 --- ### 第三部分：估值颇具吸引力，预计1年上涨空间约40%，5年上涨空间可达100%： 通过两种不同的估值框架分析，我均认为Copa的估值具备吸引力： 1. 估值吸引力基于市净率维度：Copa当前的P/B为2.0倍。若Copa持续以2倍P/B的价格将股息再投资，实现经调整后的BVPS增长，则投资者的账面价值将在短短5年内翻倍；以当前2倍P/B的价格买入的投资，将对应2028年的1倍账面价值。在此情景下，投资者将获得超额收益（在此假设下，Copa5年后的股价大概率将超过2倍P/B，意味着投资者的5年收益率将实现翻倍）。 2. 估值吸引力基于市盈率维度：Copa当前股价对应2023年EPS的6.0倍（我认为2023年利润率处于周期性高位），对应2025年EPS的6.9倍（我假设2025年利润率将回归正常水平16%）。我认为Copa的股价将升至前瞻一年市盈率的10倍水平，这意味着到2024年末，股价将达到140美元。 |指标|2023|2024|2025| |---|---|---|---| |营收（百万美元）|3411|3923|4315| |营收增长率|—|15%|10%| |EBIT利润率|23%|0.15%|0.15%| |EPS（美元）|16.29|12.18|14.01| |P/E|6.0|8.0|6.9| --- ### 第四部分：尽管存在诸多风险，但这些风险均处于可控范围，且上涨情景足以覆盖风险带来的潜在损失： 当前最大的风险在于，Copa的竞争对手——尤其是哥伦比亚航空（Avianca），以及一定程度上的拉美航空（LATAM Airlines）、Viva Air等——正在Copa的核心市场快速增加运力。Copa市场的需求十分强劲，2023年23%的营业利润率远超行业平均水平便可证明这一点，因此各方都在竞相扩张运力。 这种周期循环相当普遍，且可能持续多年。例如在2005-2014年，Copa与同行的运力增速保持在低两位数，但需求增速与之匹配，Copa因此实现了优异的回报率。拉美航空市场渗透率较低，具备快速增长的潜力。 反之，如果需求下滑或停滞，利润率将大幅缩水。好消息是，运力供给也能快速做出调整——尤其是Copa的同行普遍面临高杠杆与高借贷成本的困境。除非全球航空需求同时遭遇冲击，否则竞争对手的客机可被出售给其他地区的航司。 此外，这种供需周期相当普遍，且不太可能长期持续。 其他风险也不难通过回顾Copa的历史进行预判，例如政治动荡、自然灾害、流行病等。但Copa的历史表明，稳定经营的时期概率略高，且能带来极为丰厚的收益。以2023年市盈率6倍的估值水平来看，我愿意承担当前市场环境下的相关风险。