European Transportation: Capital allocation – buyback barometer

Research evidence excerpt

European Transportation: Capital allocation – buyback barometer

securities related services) of Barclays Bank PLC and/or

an affiliate.

Valuation Methodology: Our airline price targets are defined by a three-stage economic value creation DCF. This model starts with invested capital,

then assesses the net present value of the economic value created or destroyed during a five-year explicit forecast period, during a subsequent 20-

year value driver period in which we assume EBIT levels and growth rates are held stable, and finally during a three-year fade period in which we

assume economic value creation (or destruction) fades to zero. The advantage of our three-stage DCF model is that it takes into account our explicit

forecasts for the coming five years, rather than just as single year. The valuation is also explicit about the assumed mid-term profitability of the

business. The valuation method does not include a terminal value. Our Ryanair €29.00 price target is based on a mid-term EBIT margin of 14.5% and a

WACC of 7.4%.

Risks which May Impede the Achievement of the Barclays Research Valuation and Price Target: In addition to generic economic, geopolitical and

fuel price risks, Ryanair's business could be challenged by environmental legislation that seeks to demand manage aviation, potentially restricting

routes and imposing minimum pricing. Any operational challenges for the 737Max aircraft would challenge Ryanair's growth plans.

Disclaimer:

This publication has been produced by Barclays Research Department in the Investment Bank of Barclays Bank PLC and/or one or more of its affiliates

(collectively and each individually, "Barclays").

It has been prepared for institutional investors and not for retail investors.