Wizz Air Holdings PLC

Wizz Air Holdings PLC (WIZZ) is a Geneva, Switzerland-headquartered budget airline which is the largest low-cost airline in Eastern and Central Europe. The operations of the business are differentiated in two operating segments, namely Airline and Wizz Tours.

On 13^th November 2019, the company will release unaudited results for the six months ended 30 September 2019.

Recent News
On 2^nd October 2019, the company announced passenger and CO2 emission statistics for September 2019. In September, the company continued to grow its network and improved its clients’ offering. The company’s capacity, passengers, and load factor increased in September 2019 from the corresponding period of the last year.

Financial Highlights (three months to 30^th June 2019, €million)

(Source: Company Website)

In the first quarter of the financial year 2020, due to the positive impact of a new cabin bag policy introduced in November 2018 and a 20.1 per cent increase in the number of passengers, the company generated revenues of EUR 691.2 million, a growth of 25.4 per cent. Due to the growth of the business and higher average fuel prices, fuel expenses increased by 30.7 per cent to EUR 202.2 million, which led to an increase of 25.5 per cent in operating expenses to EUR 598.6 million, while total unit costs surged by 2 per cent to EUR 3.39 cents per ASK. However, the EBITDA margin was down by 0.8 percentage points to 27.1 per cent as compared with the last year data. Net Profit for the period increased by 101.7 per cent to EUR 72.4 million versus a loss of EUR 29.3 million in Q1 FY2019.

Share Price Performance

Daily Chart as at October-15-19, before the market closed (Source: Thomson Reuters)

On 15th October 2019, Wizz Air Holdings PLC shares were trading at GBX 3,799 at the time of writing before the market close (at 10:12 AM GMT), up by 1.01% against the previous day closing price. Stock's 52 weeks High and Low are GBX 3,902.15/GBX 2,324. The company’s stock beta stood at 0.33, reflecting the lower movement of the stock as compared to the benchmark index.

Valuation Methodology


Key Risks
Information technology and cyber risk, including website availability, protection of the own and the customers’ data and ensuring the availability of operations-critical systems; external factors, such as the default of a partner financial institution, fuel cost, foreign exchange rates, competition, general economic trends and geopolitical risk; regulatory risk; operations risk; and climate risk.

Conclusion
Amid increasing uncertainties in the Gulf and rising pressure on the supply of oil, a rise in fuel prices could significantly affect the operating costs of the company. The group operates in a tough market conditions, and competition remains one of the key risks to the business and adversely affect revenues. An economic downturn could affect demand for air travel, and the airline is exposed to global political and economic events and trends, leading to a risk to business operations from external factors.

Unprecedented disruptionsdriven by the ATC (air traffic control) strikes, slot constraints and heavily congested airports meant that 251 of the flights were repealed in the H1 FY2019. In the financial year 2020, the company expects another challenging operating environment. Brexit risk signifies the potential impact of the United Kingdom’s decision to leave the European Union on the company’s operations and financial position. The company is facing emerging headwinds and cost pressures. The company’s P/E and P/CF multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations. Currently, the stock is trading near the 52-week high, suggesting that the upside potential might be limited, and the company can face stiff resistance at the current level.

Based on the above rationale and support from valuation done using the above method, we have given a “Sell” recommendation at the current price of GBX 3,826 (as on 15th October 2019, before the market close, GMT 11:00 AM) based on 6x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters. Currency exchange rate taken for 1 EUR = 0.872263 GBP.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.