easyJet

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easyJet

peers post pandemic before the Middle East conflict. In our view, its Specialist Sales contact details:

competitive positioning on cost and product within the European short-haul

Olivia Petronilho - Specialist Sales -

industry has eroded over time versus peers. In particular, we see opportunities to European Consumer

review growth, ex-fuel costs (‘Other’ costs including corporate overheads make up (44-20) 3493-3709

~7% of group revenue), and capital allocation in order to drive enhanced olivia.b.petronilho@jpmorgan.com

profitability, returns and FCF for shareholders. Style Exposure

• (1) easyJet’s intrinsic value could be +800p if it reaches targets. Castlelake

has stated that it intends to sustain easyJet’s network, respect its airline assets

and enable future growth. In our view, a full financial break-up is neither

credible nor likely to generate sufficient value, despite easyJet’s asset backing

(we estimate c£7-8bn asset value ‘on paper’ for its fleet market value, future

orderbook, airport slots and Holidays versus current market cap of £4bn). This

is due to having to settle a full set of liabilities in a break-up, some assets are

hard to monetise, and often tied to easyJet as an operating entity. In our view,

easyJet’s assets will therefore generate more value being operated as an

ongoing entity, and ultimately delivering better returns and FCF. If easyJet’s

£1bn PBT medium-term target can be achieved (~100p EPS at 25% tax rate),

we estimate a current “intrinsic” value of 710-920p per share based off an 11-

12x P/E multiple and discounted back by 3-5 years. Reaching that target over

a 4-5 year timeframe (no set timeframe is currently attached to it), would imply

a 20-26% EPS CAGR based off our Sep-27E forecasts. Note that historically