Wizz Air Holdings PLC

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.

On 8 June 2022, Wizz Air expects to release its FY22 results.

Investment Rationale for Valuation – Speculative Buy at GBX 2,764.00

• Excellent Growth in Passenger Traffic: In May 2022, Wizz Air recorded a 390% YoY growth in passengers, while the Company continued to grow its network and improve its customer offerings.
• Market Expansion: On 10 May 2022, Wizz Air signed a Memorandum of Understanding with the Ministry of Investment of the Kingdom of Saudi Arabia to tap the country’s airline market development opportunities.
• Stable Investment Grade: Wizz received a credit ratings of ‘BBB-‘ by Fitch and ‘Baa3’ by Moody's confirmed a decent liquidity position.
• Increase in Load Factor: The Company had shown a solid increase of 15.7% in load factor from 63.6% for the 12 months period till 30 April 2021 to 79.3% for the 12 months period ended 30 April 2022.
• Technical Indicator: WIZZ’s stock price has gone below the lower Bollinger Band, while the 14-day RSI (~38.97) is approaching the oversold scenario.

Key Risks

• Ukraine Crisis: Due to the ongoing war between Ukraine and Russia, flights in Ukraine, Moldova and Russia remained suspended. Moreover, high fuel prices could impact the Company’s margins.
• Macroeconomic Risk: The equity markets are likely to remain jittery over rising interest rates, the strongest U.S. dollar in two decades, concerns over inflation and possible recession.

FY22 Post-Close Trading Statement (for the financial year ended 31 March 2022, as of 14 April 2022)

• Decent Trading Environment: The Group expects Q4 FY22 operating loss in the range of €210 - €190 million, ahead of the guidance levels driven by a stronger trading environment.
• Stable Balance Sheet: The Company has maintained a decent balance sheet position with cash equivalents of €1.37 billion as of 31 March 2022.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Cash Flow Approach (FY23E)

*Peers: Jet2 PLC, National Express Group PLC, and Stagecoach Group PLC.

*All selected peers are LSE-listed Companies from the Travel and Leisure sector.

*1 EUR = ~0.86 GBP. 

Conclusion

Based on the solid passenger growth during April 2022, strong cash balance, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Wizz Air Holdings PLC at the current market price of GBX 2,764.00 (as of 6 June 2022, at 12:10 PM GMT+1) with lower double-digit upside potential based on 10.31x Price/NTM Cash Flow (approx.) on FY23E cash flow per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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

Note 2: Investment decision should be made depending on the investors’ appetite on 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 subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which 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 5: ‘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.’

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 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 unfavorable movement in the stock prices.

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