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 airline connects 146 destinations across 44 countries and offers more than 650 routes from 25 bases through a fleet of 115 Airbus A320 and Airbus A321 aircraft, which is one of the youngest aircraft fleets in the world with an average age of approximately 4 years. The operations of the business are differentiated in two operating segments, namely Airline and Wizz Tours.

Traffic Statistics
In August 2019, the company expanded is operations with the introduction of 23 new routes to Vienna, United Kingdom, Georgia and Ukraine. The new routes will help the company to enter into three new markets which include Odessa, London Southend and Edinburgh. The company also expanded its fleet with the introduction of Airbus 321neo aircraft, increasing the fleet to 119 aircrafts. The company, for the first time, surpassed 4 million passengers monthly. Wizz operates at lower CO2 emissions against its competitor airlines. In August, CO2 emissions was 2.1 per cent at 56.1 grams per passenger/km, lower versus the same period of last year

Financial Highlights – Q1 Financial Year 2020 (€, million)

(Source: Quarterly Report, Company Website)

n 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. EBITDA climbed by 21.9 per cent during Q1 FY20 to EUR 187.2 million from EUR 153.6 million in Q1 FY19. 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. Cash and cash equivalents surged by 31.1 per cent to EUR 1,463.6 million, up from EUR 1,116.6 million recorded in a year-ago period.

Share Price Performance

Daily Chart as at 5^th September 19, before the market close (Source: Thomson Reuters)

On 5^th September 2019, Wizz Air Holdings Plc shares were trading at GBX 3,635.00 at the time of writing before the market close (at 2:38 PM GMT), surged by 2.74 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 3,902.15/GBX 2,300.00. The group’s stock is reflecting lower volatility as against the benchmark index based on the company’s beta of 0.35.

Valuation Methodology

*Peers: Compass Group Plc, BBA Aviation Plc, National Express Group Plc, BAE Systems Plc and John Menzies Plc.

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 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 from external factors.
The company expanded is operations with the introduction of 23 new routes and entered into three new markets which include Odessa, London Southend and Edinburgh. The company also expanded its fleet with the introduction of Airbus 321neo aircraft, increasing the fleet to 119 aircrafts.

Therefore, based on the above discussion and valuation done using the above methodology, we have given a "Hold" recommendation at the closing price of GBX 3,538.00 (as on September 04, 2019), based on the 14.70x NTM Peers Average Price/Earnings (approx.) on the FY20E earnings per share (approx.).
 

Restaurant Group Plc

Restaurant Group Plc (RTN) is a UK based hospitality group with a diverse portfolio of well-known brands. The company presently operates 650 pubs and restaurants in the UK. The company also have a presence in Concessions business with 30 brands in the 70 outlets, mostly in the UK airports.

Recent News
On 3rd September 2019, Tuesday, Restaurant Group announced its interim results ending June 30th, 2019.

Financial Highlights – H1 Financial Year 2019 (£, million)

(Source: Interim Report, Company Website)
 
In H1 FY2019, the company’s reported revenue increased by 58.20 per cent to £515.9 millionas compared with the corresponding period of the last year, due to acquisition of Wagamama and consolidated completely into TRG business.The company’s adjusted EBITDA stood at £61.4 million, an increase of 60.1 per cent from the previous year same period data.The company’s Adjusted operating profit stood at £36.5 million, an increase of 70.8 per cent from the previous year same period data.In H1 FY2019, the company reported a statutory operating loss of £79,268 thousand versus an operating profit of £12,901 thousand in H1 FY2018. Adjusted profit before tax surged by 35.6 per cent to £28.1 millionas compared to £20.7 million in H1 FY18. Adjusted basic earnings per share stood at 4.51 pence against the 5.89 pence in H1 FY18.

Share Price Performance

Daily Chart as at 5^th September 19, before the market close (Source: Thomson Reuters)

On 5^th September 2019, Restaurant Group Plc shares were trading at GBX 130.20 at the time of writing before the market close (at 2:38 PM GMT) and surged by 2.36 per cent against the previous day closing price. Stock's 52 weeks High and Low are GBX 222.94/GBX 110.10. The group’s stock is reflecting higher volatility as against the benchmark index based on the company’s beta of 1.30.

Valuation Methodology

*Peers: On The Beach Group Plc, Domino's Pizza Group Plc, Cineworld Group Plc, Marston's Plc and Ten Entertainment Group Plc.

Conclusion
On Statutory basis, the company’s profitability remained in the negative zone. The bottom-line performance has declined as well for the current period. The company operations are further impacted by the ongoing Brexit, as it will disturb the company’s supply chain.

On an adjusted basis, the company had shown decent financial performance for the first half of the financial year 2019. The company’s top-line performance has improved significantly with a solid performance from all businesses for the period.

The company is focussed on optimizing its Leisure business through disciplined estate management and targeted operational initiatives.The company’s business is positioned purposefully and is diversified to get benefit from the growth opportunities available.

Therefore, based on the above discussion and valuation done using the above valuation methodology, we have given a "Speculative Buy" recommendation at the closing price of GBX 127.20 (as on 4 September 2019), with single-digit upside potential, based on 11.24x NTM Price/Earnings multiple (approx.) on the FY19E earnings per share (approx.)
 
*All forecasted figures and Peer information have been taken from Thomson Reuters. Currency exchange rate taken for 1 EUR = 0.89766 GBP.
*The “Speculative Buy” recommendation is also valid for the current price as covered in the report (as on 5th September 2019).

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