Valuation of SAS

Daniel Yousafzai

Student thesis: Master thesis


Scandinavian Airlines (SAS) was founded in 1946 and is a joint venture built upon the flag carriers from Sweden, Denmark and Norway. The company is listed on the Stockholm, Copenhagen and Norway stock exchanges simultaneously and the ownership are divided between institutional and private investors, consisting of the three Scandinavian governments, which accounts for 50 percent of the shares, whilst the rest are freely traded. The unique cross-country, part state owned, and part private owned company, makes for an interesting case, especially in the current economic climate. The purpose of this thesis is to assess and evaluate the current state of SAS, as well as to assess the future of the company with the angle being that of an investor’s. This will be accomplished by conducting a strategic financial analysis and valuation of SAS, to arrive at a theoretical share price as of August 1st 2013. The strategic analysis revealed that SAS is operating in a tough environment, where the external factors are heavily affected by the financial crisis. In the industry itself, SAS are opposed to fierce competition mainly from the low-cost carriers, with the competitive landscape being characterized and driven by ticket prices. The customer’s lack of loyalty in the industry contributes to the challenging environment and each market share must be fought for. To further add to the woes, SAS’ costs are amongst the highest in the industry, which results in a limited maneuver room to turn things around. However, the company itself has recognized this as one of the main problems, and SAS is actively attempting to reduce the cost levels through their 4Excellence and 4XNG strategies with divestments being a big part of the means to accomplish it. With the sales declining, SAS’ financial results over the past few years, has been anything but to be proud of. The return of equity has been negative throughout the analysis period, albeit improving over the years. The return on invested capital has also been negative, except for 2011, where it was positive. Likewise, the profit margin has shown the same development. Despite the key financial figures being at very poor levels, there is some hope to be found in the small signs of improvement. The strategic and financial analyses formed the basis for the forecasting, which in turn led to a valuation of SAS using the DCF and EVA-models. In both models WACC was used as the discount factor, which was found to be 7.79 percent and through a weighted valuation incorporating three scenarios, the calculated share price as at August 1st, 2013, was found to be SEK 11.79, indicating that SAS’ share price was undervalued by SEK 1.11.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2014
Number of pages97