Equity valuation: TAP - Transportes Aéreos Portugueses, S.A.

Abstract

The present Masters’ dissertation aims to address what has been one of the most widely discussed topics within Portuguese society for the last couple of years: Is it possible to recover the money invested in TAP - Transportes Aéreos Portugueses S.A. (commonly known as TAP) and funded by the country’s taxpayers, through the process of reprivatization? In order to answer this question, a detailed financial analysis must be performed which can bring some clarity regarding the company’s current financial position and its future outlook. Given the complex nature of performing a financial evaluation of a company due to the several constraints imposed by each model, a model that would fit TAP’s current situation and the sector it is inserted in had to be chosen. For that analysis to be performed to the highest possible degree of accuracy, the Discounted Cash Flow model was used, and more specifically the Free Cash Flow to Firm approach, with the model’s inputs being based on the Company’s historical financial data. The result obtained, considering 31st December 2022 as valuation date, was an equity value for TAP of EUR 2,181.7 million, which means that is not possible to recover the total amount injected during the restructuring plan.