1. UK Travel & Leisure Sector Landscape

The United Kingdom is famous for its appealing landscapes, cities of culture, and engaging history that has held a strong charm for domestic as well as international visitors. An increase in the number of visitors has created opportunities for leisure and tourism providers to offer access to the best British food and cultural experiences. Some of the popular companies in the space include Whitbread PLC, Easyjet PLC, Carnival PLC, etc.

The Travel & Leisure space has benefitted from the increased pace of vaccination to curb the COVID-19 pandemic. As per data from Office for National Statistics, the proportion of travellers arriving in the UK that had got at least one COVID-19 vaccination dose increased from 1 in 10 passengers in February 2021, to over 9 in 10 in March 2022. Travellers who received two COVID-19 vaccinations increased from 11% to 74% for UK residents and from 7% to 57% for overseas residents between November 2021 and March 2022.

Key Trends in the Travel & Leisure Sector

Risk Exposures to Travel & Leisure Sector 

• Risk of COVID-19 Pandemic: Emergence of a new variant of COVID-19 or random outbreak can again initiate restrictions on travel and distancing, thus impacting the sector adversely.
• Macro Risk: The Bank of England has hiked the interest rate by 25 bps in its latest monetary meet in order to curb inflation. With talks of further interest rate hikes, there is a possibility of the economy turning towards recession.
• High Cost of Living: Consumers in the UK are battling a high cost of living driven by record inflation levels in the past 40 years. This can dent consumers from spending towards discretionary activities like leisure and travel.  

SWOT Analysis

Travel & Leisure Sector Outlook

The sector is set to witness decent traction in demand as summer travel firms up in the UK. There are favorable tailwinds in the space with the industry emerging strongly from the COVID-19 crisis and consumers rushing for revenge travel, due to delay in trips caused by restrictions of the pandemic. Hospitality and leisure firms are fully capitalizing on the trend despite an increase in the cost of living. Similarly, airline operators and cruise companies are looking to increase their fleet size and capacities to meet the growing demand.

2. Investment analysis and stocks under discussion (WIZZ and GMR)

After gaining insights into the Travel & Leisure sector, we would look at the business model of two players listed on the London Stock Exchange.

A. Wizz Air Holdings PLC (LON: WIZZ)

(Recommendation: Speculative Buy, Potential Upside: 17.07%, Market Capitalization: GBP 2.08 billion)

Wizz Air Holdings PLC is an FTSE 250 listed low-cost airline providing services on scheduled short-haul and medium-haul point-to-point routes across Europe.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group) 

From a technical standpoint, the stock is trading close to the Lower Bollinger band with low 14-day RSI level at ~28.24, reflecting an oversold stance and a possibility of a reversal in the near term.  

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 17.07% over the current price of GBX 1,930.24 (as of 22 June 2022, at 08:02 AM GMT+1).

B. Gaming Realms PLC (LON: GMR)

(Recommendation: Speculative Buy, Potential Upside: 15.33%, Market Capitalization: GBP 69.96 million)

Gaming Realms PLC is a FTSE AIM All-Share index listed licensor and developer of mobile-focused gaming content.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

From a technical standpoint, the stock is hovering near to its lower Bollinger band with 14-day RSI level of ~38.99, reflecting an oversold stance.

Valuation Methodology

Our illustrative valuation model suggests that the stock has an upside potential of 15.33% over the current price of GBX 24.00 (as of 22 June 2022, at 08:02 AM GMT+1).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4:  Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Note 5: Dividend Yield may vary as per the stock price movement.  

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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