Wizz Air flies higher on RBC upgrade

19th Oct 2016 10:08

(ShareCast News) - Wizz Air flew higher as RBC Capital Markets initiated coverage of the Eastern European low-cost carrier at 'outperform' with a 2,100p price target.The bank said Wizz offers cash generative growth a non-growth multiple. In addition, it pointed out that it has higher growth markets, with a cost base and scale few competitors match.RBC said there are few shares offering scope for more than 10% earnings per share compound annual growth rate, free cash flow yield rising to more than 10% and over 30% return on equity in 2017.The bank pointed out that Wizz routes mostly link Central and Eastern Europe states to each other and Western Europe."CEE GDP per head is around 30% lower than in Western Europe, but growing faster. Lower GDP/head translates into a faster rising propensity to fly and market growth at higher GDP multipliers than Western Europe."Wizz Air enjoys ex-Fuel cost/available seat kilometres close to Ryanair combined with rising scale of operation and consumer relevance. At this life-stage, we think Wizz is running ahead of a usual low cost carrier profit growth trajectory - with more to come."RBC said that many local competitors are still country-focused and often capital-constrained. This sets the scene for further low cost carrier share expansion."We do not see just one CEE winner but a likely small set of winners because of the already concentrated markets. We believe Wizz will be one of these."At 1015 BST, Wizz shares were up 3.5% to 1,530p.