Broker snap: Large targets for easyJet

18th Nov 2010 13:14

Nomura thinks a new focus on business customers and the introduction of other initiatives will see no-frills airline easyJet hit its target of £5 profit per seat by 2013.The annual report on Tuesday saw pre-tax profit for the year ended September surge to £154m from £54.7m the year before. While revenue per seat, 5% higher than last year, "developed robustly," according to analyst Andrew Evans, cost per seat (excluding fuel performance) was poor at 7% higher than the previous year, though the company was affected by a series of disruptions."The key drivers to achieve the targeted £5 profit per seat are more related to execution of the business model and initiatives," says the broker. These include the focus on business customers and customer relationship management data, "which have been only partially implemented in recent years"."A blue sky profit bridge to 2013 points to £7.38 profit per seat if management executes planned initiatives. That leaves a £2.38 buffer to hit our forecasts," says Evans.The estimated profit per seat in 2013 equates to over 60p of earnings and has the shares trading on a little over a projected price earnings ratio of 7.The broker has raised its price target and has reiterated its "buy" recommendation. "We raise our price target to 600p (from 500p) based on 12 times our 2013 earnings per share forecasts, discounted back to today. We forecast easyJet to yield 2.7% in that year".