Ryanair - Buy

RYANAIR – BUY Equity Research • Industry • 10 May 2010 • Jyske Markets

NEW CASE This is a case recommendation. The company will be included in our equity-research universe as long as it holds price potential justifying a BUY recommendation. When this is no longer the case, we will discontinue our coverage although our recommendation is ACCUMULATE, REDUCE or SELL. Publisher: Jyske Markets Vestergade 8-16 DK - 8600 Silkeborg Senior Equity Analyst Robert Jakobsen +45 89 89 70 44 [email protected] Equity Analyst Lars Terp Paulsen Translation: Translation Services Read more equity research reports on www.jyskemarkets.com Disclaimer: please see the last page.

Lowest cost always win! We start our coverage of Ryanair1

Why BUY recommendation for Ryanair?

with a BUY recommendation, a high risk profile and a price target of EUR 4.5, which is just below 30% from the current price level. In a tough sector, Ryanair has managed to build up a successful business model and is today one of Europe’s largest and most successful airline companies. In the coming years we anticipate strong EPS growth, boosted, among other things, by rising ticket prices, declining unit costs as well as solid passenger growth. This is one of the most important reasons behind our BUY recommendation.

Ryanair is the airline sector’s rascal and strong company: Its simple business model offers major economies of scale and unit costs that no other company in the sector can compete with. Passenger growth + rising airfares + declining unit costs = high EPS growth: In the period 2010-2013 we expect that Ryanair can deliver average EPS growth at 18% - we consider this the biggest price trigger in the share. This growth must particularly be driven by the following factors: • In a market where most rivals must fight to minimise the decline of passengers, Ryanair

will in the period deliver approx. 10% passenger growth annually.

• Due to the macroeconomic conditions Ryanair has in the 2009-2010 accounting year lowered its airfares by an average of 15% y-o-y. Hence, Ryanair’s airfares are now approx. 50% lower than its nearest rival. Combined with the prospects of a macroeconomic improvement, Ryanair should without any major problems be able to raise its average airfare by 4-5% annually.

• Ryanair is working intensively on a further reduction of the unit costs.

More focus on creating shareholder value: As from 2013 and onwards Ryanair has indicated that it will focus less on growth and more on creating shareholder value. This shift will be appreciated by many investors. Attractive valuation: In terms of our DCF model, peer-group analysis and compared to the historical average, Ryanair has an attractive valuation.

Ryanair – a high-risk share: One of the biggest risks is that Ryanair's aggressive cost and sales policy will give the company so large image problems that customers want a major discount to fly with the company. This will give Ryanair problems with respect to raising airfares and thus the earnings margin.

Price triggers: Extraordinary dividend – rising airfares – success in the East – declining airport taxes – investors start believing that Ryanair can meet its 2010-2013 forecast.

(EURm) 2009R 2011E 2012E

Sales 2.942 3.322 3.787

Operating result 144 422 579

Profit/loss before ta -180 411 569

Profit ratio 5% 13% 15% High/low latest 12 months 4/3

ROE -7,0% 13,0% 16,9% Price trend (3/12 months) -7%/-8%

ROIC 5,3% 12,2% 14,3% - relative to DJ EUROSTOXX 0%/-26%

EPS -0,1 0,2 0,3 Market value (EURm) 4.844

P/E -26,1 14,2 10,4 Free float 95%

EV/EBITA 29,5 12,4 9,1 Ave. daily volume (EURm) 12

P/BV 2,1 1,8 1,8 Reuters RYA.I

Dividend 0,2 0,2 Bloomberg RYA ID

Fundamental valuation UndervaluedRisk High

Please note: the 2010 accounting year is from March 2009 to March 2010) Price development

News flow Neutral12-month price target 4.50Current price 3.4

12,6%

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1 See appendix for description of Ryanair

http://www.jyskemarkets.com/�


We start our coverage of Ryanair with a BUY recommendation and a price target at EUR 4.5. Here are the reasons behind our decision:

Lowest cost always wins

The strongest: Ryanair is not only the rascal company of the airline sector but also the strongest company. Thanks to Ryanair’s economies of scale, simple business model, which has over time been the first with new ways to lower costs (e.g. 100 online sales, 'do it yourselves' and only one aircraft to maintain) and the management's 100% focus on cost control, no European airline company is even close to Ryanair’s unit costs per passenger. We consider this a major advantage in a market where price is the decisive factor. In 2009 Ryanair’s average cost per passenger was EUR 36 compared to EUR 68 for its arch rival Easyjet. From 2007 to 2009 Ryanair managed to lower its cost per passenger by 13% (thanks among other things to the declining oil price). In comparison Easyjet increased its cost per passenger by 5% in the same period of time! Ryanair’s average cost per passenger is declining and markedly lower than its rivals

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Aer Lingus EasyJet Ryanair

Costs per passenger 2007 Costs per passenger 2009

Source: Ryanair High growth: Ryanair has, among other things, used its strong market position to win market share during the global slowdown. While many of the ’traditional’ airline companies have been forced to reduce capacity and close down routes (sold or grounded aircraft) and some medium-sized companies have even been forced to close down, Ryanair has raised its number of passengers by 14% in 2010 and opened further routes. This trend will continue over the coming years, which supports our anticipations of solid passenger growth. Ryanair has guided that it expects to open 146 new routes (an increase above 10%) in 2010 and transport 80m passengers in 2012 – corresponding to annual passenger growth at approx. 10%.


The prospects of rising airfares, declining costs and passenger growth will support Ryanair's earnings capacity Over the coming years, we particularly see three important drivers that can lift Ryanair’s earnings capacity considerably.

1) Rising ticket prices: In the 2010 accounting year (ends at end-

March) Ryanair is expected to have lowered its average ticket price by

15% y-o-y to only EUR 34. This price reduction has primarily been

driven by Ryanair’s strategy about delivering high passenger growth

despite the global slowdown, which has of course affected the

willingness to travel on behalf of Europeans. If the price decline in

2010 is combined with the fact that Ryanair has the lowest prices by

far (e.g. Ryanair’s average airfare is no less than 52% lower than its

arch rival Easyjet’s airfare), there will, in our view, in line with a

stabilisation of the European macroeconomy be basis of raising the

airfare by at least 4-5% over the coming years. The chart below shows

that Ryanair has room to raise its airfare.

Ryanirs’s airfares are markedly lower than its rivals’ airfares

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British Airways

LufthansaAir France Iberia Aer Lingus EasyJet Ryan

Average airfares 2010

Source: Ryanair

2) Declining unit prices: You need to go far back to find a company that

is more obsessed by reducing its cost base than Ryanair. Since 2000

Ryanair has reduced its average costs per plane ticket by impressive

42%. This has, among other things, happened by renegotiating airport

contracts on an ongoing basis, ensuring that all passengers check in

through the internet, limiting wage increases, freezing wages,

making productivity improvements, rearranging routes, making

passengers reduce their ‘check in’ luggage, etc. In the 2010

accounting year, Ryanair is well on its way to reduce costs per plane


ticket by 4-5%, which is impressive compared to its closest rivals,

which have due to declining passenger traffic suffered from rising

costs per passenger. Over the coming years, Ryanair’s target is to

reduce its unit costs further, which seems very aggressive. We will be

satisfied with ’just’ unchanged levels. The chart below shows the

number of passengers per employee in Ryanair and some of its rivals.

Number of passengers per employee

0100020003000400050006000700080009000

10000

Ryanair Easyjet British Airways

Air France Lufthansa

Source: Ryanair and Jyske Bank

3) High passenger growth in 2011 and 2012: Growth in 2011 and

2012 is, among other things, to be driven by more bases in Central &

Eastern Europe2

Impressive passenger growth at Ryanair

(an area with several hundred million inhabitants).

In May, Ryanair will open its first base in Central Europe in Kaunas,

Lithuania. Two aircraft are to transport approx. 1m passengers a year

to 18 different destinations. In our view, there are good chances that

Ryanair’s discount concept will be successful in Central and Eastern

Europe – hence, we also expect that the management will

aggressively pursue the potential by opening many new bases in this

area. Furthermore, we still see growth opportunities in Western

Europe.

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2 See appendix for route map


Source: Ryanair

In the period from March 2009 to March 2012 Ryanair will see an

inflow of 124 new Boeing 737s. At the end of March 2010 Ryanair had

232 aircraft. This figure will over the next two years increase to 294.

Hence, Ryanair may in the 2010-2012 accounting years deliver

annual passenger growth at 10% corresponding to its target of 80m

passengers in 2012.

Passenger growth and capacity expansion

Source: Ryanair & Jyske Bank

4) Increase sales of related products: Ryanair generates additional

sales of EUR 10 on average for each of its passengers. This is, among

other things, through fees, commissions on sales of train tickets,

hotels, car rent and travel insurances, online advertising at

ryanair.com, telephone calls during the journey, food and beverages,

etc. We expect that the additional sales will increase over the coming

years driven, among other things, by the launch of new products (e.g.

offering mobile broadband, selling individual films or other

entertainment (e.g. financed by advertisements), games (e.g. casino

games, bingo, etc.), travelling packages, tickets to sport events, city

passes and musicals) and by its targeted focus on making a higher

proportion of the passengers buy some of its services.

Due to the prospects of rising airfares, declining unit prices and passenger growth Ryanair will over the coming years deliver solid sales growth and EPS growth, which is a main reason behind our BUY recommendation. In the period 2010-2013 we expect that Ryanair can deliver average EPS growth at 18%, so that Ryanair in 2012, at the current share price, is trading at a P/E at 9X, while the share has historically (past five years) been trading at a P/E of 18X.

Ryanair is growing, but the focus of attention will

soon shift to the creation of additional value for the shareholders Ryanair is known for its aggressive growth plans. The target has been year on year to carry an increasing number of passengers. Whereas Ryanair in 2002

2008 2009 E2010 E2011 E2012 E2013 Development in Ryanair’s capacity of Boeing 737 aircraft: Inflow of Boeing 737 aircraft 36 35 54 50 25 15 Outflow of used Ryanair aircraft* -6 -17 -3 -10 -3 -10 Ryanair’s aircraft fleet 163 181 232 272 294 299 Capacity growth y-o-y 23% 11% 28% 17% 8% 2% Ryanair’s anticipations to passage growth: Number of passenger (m) 50.9 58.6 66.3 73 80 85 Growth in number of passengers: 20% 15% 13% 10% 10% 6%


carried 10 million passengers, the figure has in 2009 grown to 66 million – growth which has created Ryanair’s economies of scale. This on-sided focus on passenger growth has, however, had a price, namely that we have seen less focus on creating shareholder value. The tone among CEOs at Ryanair is gradually changing in favour of the shareholders. Ryanair’s CEO, Michael O’leary, recently commented that after the 2012 accounts, Ryanair will have less focus on passenger growth and more focus on optimising the business and hence the earnings power. A shift which will in our view be appreciated by many investors. For the 2013 financial year, Ryanair’s target is to double EBIT in relation to the EUR 400m in 2007. We point out, however, that it is “only” a target and no official forecast from Ryanair, which is also reflected in the consensus estimate for 2013 which is at EUR 652m, but if Ryanair attains EUR 800m, the valuation of the share will be a 2013 P/E of 7! It should be mentioned that an important condition for attaining EUR 800m is that the oil price stabilises around USD 70 per barrel.

Attractive valuation:

In terms of our DCF model, peer-group analysis and compared with the historical average, Ryanair has an attractive valuation.

DCF model: Our DCF model estimates a fair value of EUR 4.0 and a 12-month price target

of EUR 4.3 (the price level was EUR 3.4 on 10 May 2010). A price target which is, among other things, based on the following central presumptions: • WACC at 8.9%, based on a beta of 0.95, a market risk premium of 5.9%

and a 15-year risk free interest rate of 3.8%.

• Average annual sales growth during the budget period (2010-2019) of

5.4% compared with the historical figure (latest five years) of 22%.

• An average annual EBIT margin of 14.6% during the budget period

compared with the historical figure (latest five years) of 14.1%.

Sales growth, EBIT margin and EPS growth

See summary of DCF model on page 12.

Peer group analysis:

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Sales growth Operating margin Tax rate EPS (r.h.s.)


Our peer group analysis should be taken with a grain of salt. There are particularly two reasons behind this: 1) several of the nearest rivals are also in 2010 expected to report red figures on the bottom line, therefore they are not included in the calculation of P/E and 2) Ryanair reports non-calendar accounts – i.e. the group will already release its full-year 2010 accounts at the end of March. So the 2011 accounts will include nine months of 2010.

Nevertheless, Ryanair is measured on 2010 and 2011 P/E as well as EV/EBITDA trading at a discount compared with the sector.

Source: Bloomberg

The development in Ryanair’s P/E and the current estimate for 2010 Ryanair’s 2010 P/E at 17x must be seen in the light of the fact that the company decided to reduce their ticket prices by 15% y/y to create passenger growth (13% y/y) during a period of time when most rivals are surrounded by negative growth. So although the financial year 2010 has also been a difficult period of time for Ryanair, the share is trading in line with the historical average (latest five years) which is 18x. As mentioned above, we anticipate that the group will in the coming 12 months deliver solid earnings growth.

The share has been hit by the oil price and macroeconomic downturn As appears from the table below, the Ryanair share has lost ground in recent years. The price decline from the approx. EUR 6 to EUR 3.4 EUR was primarily boosted by rising oil prices. Due to the company’s strategy about solid passenger growth Ryanair has decided not to pass the higher oil prices on to the ticket prices, a decision which obviously affected the earnings power. Finally, the macroeconomic recession which affected consumers’ incentive to travel has obviously also put a damper on the share price. Since then, the oil price has risen less fast, and we are hopefully moving towards macroeconomic stabilisation. Both situations are not yet (fully) reflected in the share price. Price development of the Ryanair share over the past five years

Peer group analysis Company P/E(2010) P/E(2011) EV/S(2010) EV/S(2011) EV/EBITDA(2010) EV/EBITDA(2011)

RYANAIR HOLDINGS 17.7 15.7 1.8 1.5 8.3 7.3 EASYJET 13.6 9.3 0.6 0.5 6.1 4.6 AIR BERLIN #NA 16.9 2.2 2.0 50.3 36.0 DEUTSCHE LUFTHANSA #NA 120.0 0.2 0.2 3.5 2.7 BRITISH AIRWAYS #NA #NA 0.6 0.6 12.2 5.2 AIR FRANCE-KLM #NA #NA 0.4 0.4 16.3 5.0 JETBLUE AIRWAYS 13.9 10.2 1.0 0.9 6.0 5.6 SOUTHWEST AIRLINES 22.5 18.0 0.9 0.8 6.6 5.9 CHINA EASTERN AIRL. 'A' 175.1 38.3 2.4 1.8 42.2 13.2 Market-weighted average 105.0 32.9 1.6 1.3 27.1 9.5 Simple average 34.7 25.4 1.1 1.0 16.8 9.5


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The share is under pressureby e.g. a rapidly rising oil price, which Ryanair has difficulties passing on to its

The Ryanair share is rather stable, while the financial crisis is powering ahead.

The share increases due to a couple of super

quarterly accounts and a

Source: Datastream

Highest risks

Rising oil prices: in the 2009 financial year (includes nine months of the 2008 calendar year), Ryanair’s costs to jet fuel rose by just below 60%. A price increase which the company decided not to pass on to its customers - among other things, because it is Ryanair’s policy never to impose a fuel adjustment factor. Ryanair uses forward contracts to hedge part of the oil requirement for up to 18 months ahead in time.

USD strengthening: a strengthening of USD against EUR will not be to the benefit of Ryanair since it will make the aircraft as well as the jet fuel more expensive. A 10% strengthening of USD will affect the net profit by EUR 190m.

Image: Ryanair’s image has been strongly dented over the years. The media have on several occasions claimed that Ryanair treated its passengers badly – for instance a Ryanair aircraft landed in another airport without informing the passengers or Ryanair ”forced” its passengers to wait for several hours in the airplane without offering them anything to drink etc. – stories which have dented Ryanair’s image. Although the ticket price is the most important parameter when customers choose their air travel, Ryanair risks getting so bad an image that consumers will only fly Ryanair if the ticket price is somewhat cheaper than the alternatives.

Insufficient passenger growth: as appears from the table on page 5, Ryanair is facing a capacity expansion in the coming three years whereas passenger growth does not follow suit at the same pace. If Ryanair has problems filling its new aircraft, it will dent the cost base significantly and the costs per passenger will increase.

Rising costs: for one reason or the other, Ryanair will have difficulties lowering or maintaining its costs per plane ticket.

Falling incentive to buy: a new macroeconomic downturn, a major terrorist attack in Europe, one of Ryanair’s aircraft crashes or other events which will have an adverse effect on the incentive to travel among Europeans.

Poorer conditions at the airports: it will be increasingly difficult for Ryanair to sign attractive agreements with new and existing airports.

Strike?: disagreements among the management and Ryanair’s crew. For instance, we may see disagreements after the Ryanair management introduced a halt to wage increases in the financial years 2009 and 2010.

New CEO: Ryanair’s CEO, Michael O´Leary, will retire. O´Leary has definitely been an important


driving force behind Ryanair’s success, and, of course, there is no guarantee that Ryanair can find similar capacity.

New strong rival: as mentioned above, Ryanair today has a unique cost advantage compared with its closest European rivals. Still, it is not unlikely that another successful low-cost supplier wishes to expand into Europe, such as Southwest Airlines (USA).

A share with wide price fluctuations: in historical terms, the Ryanair share has been subject to wide fluctuations. Although we anticipate a period of macroeconomic improvement, there is no guarantee that the share will not decline even further. Low visibility: generally, Ryanair has a poor visibility when it comes to estimating the development in the coming quarters. Typically, the group has good visibility approx. three months ahead in time, and subsequently it becomes very blurred. Due to the poor visibility, investors should be prepared that the company may announce major up and downgrades or quarterly accounts fluctuating according to consensus estimates. In the graph below EPS for the quarter has been compared with the forecast EPS.

EPS and forecast EPS

3. kvt. = Q3, etc.

Price triggers

Extraordinary dividend of 10%-20% is possible in 2-3 years: CEO, Michael

O’Leary, announced that Ryanair is planning to pay extraordinary dividend in 2-3 years. For an airline company, Ryanair has a strong balance sheet (short- and long-term debt is in line with Ryanair’s liquid assets of EUR 2.3bn). As from the 2012 accounts, Ryanair’s Capex investments will automatically decline since Ryanair will buy much fewer aircraft from Boeing. Combined with the increased focus on an optimisation of operations, Ryanair’s cash flow will increase noticeably from 2012 to 2013 and onwards. A dividend of EUR 500m-1,000m corresponding to 10%-20% will not be unlikely. After 2012-2013 Ryanair can pay a similar dividend every 2-3 years.

Investors believe that Ryanair will attain its targets: the equity market gains confidence that Ryanair will double its EBIT from 2007 to 2012.

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Successful in Central and Eastern Europe: Ryanair’s expansion in Central and Eastern Europe is successful. Rising ticket prices: Ryanair manages to lift its ticket prices without any noticeable effect on passenger growth. Rising ticket prices during a period of time when investors expect so are in our view one of the most important price triggers. In June, Ryanair will announce its 2011 forecast for the trend in its ticket prices. Following the dramatic price decline in 2010 (-15% y/y) it does not seem unrealistic that Ryanair will guide a fair increase for 2011. Idle capacity: several large regional rivals are forced to close down (or go bankrupt) a fair share of its regional routes. Ryanair lurks in the wings to snatch idle capacity. Falling airport taxes: a major battle occurs between airports either to gain or maintain Ryanair at their airport. For the airport, an agreement with Ryanair is often the shortest road to creating passenger growth and breathe life into local tourism. Even during the deepest macroeconomic downturn for several decades, Ryanair has proved that the company can deliver solid passenger growth whereas the majority of its rivals are reporting declines. The keener the competition Ryanair can create among airports, the lower the taxes will the company have to pay and the better the airports (closer to the cities) can Ryanair get. Away with tourist taxes: the UK and Ireland abandon, change or lower their tourist taxes. The two countries have introduced a GBP 10 tourist tax per passenger, a decision which has according to Ryanair dented the traffic. Ryanair particularly finds its unreasonable that the tax is the same whether it is a transatlantic route or a ”local” flight from for instance London to Dublin.


Appendix:

Who is Ryanair: Ryanair was established in 1985 with a capital base of GBP 1. In the early years, the 25 employees carried 5,000 passengers between Waterford, Ireland to Gatewick, London. In 1986, the company added a second route – flying Dublin-London hence challenging British Airways and Aer Lingus which at this point in time held a duopoly on the route (with resultant high sales prices). An opportunity which Ryanair did not fail to grasp. From the beginning, Ryanair set its ticket prices considerably below those of the two rivals, and in 1986 Ryanair ended up flying 16 times more passengers than in 1985. In the years up to 1989, Ryanair reported solid growth, but in 1990 British Airways and Aer Lingus stroke back, which resulted in a major price war. This price war ended up with Ryanair reporting a net loss of GBP 20m – a large loss for a minor unestablished airline company. To rescue the company, restructuring measures were implemented, and the management decided only to use one type of aircraft in the future (Boeing 737) and copy Southwest Airline’s low-cost business model; Ryanair wanted to be cheapest on all routes. A courageous target for an airline company which had at this point in time still not seen any black figures on its bottom line. In 1991, the incentive to travel was generally hit hard by the Golf War but nevertheless, Ryanair reported its first profit. Due to Ryanair’s low-cost concept, the airline became one of the largest players in the European airline market. Whereas Ryanair in 1991 carried 0.7 million passengers (primarily from or to Dublin), the figure had in 2010 grown to 66 million passengers with more than 200 Boeing 737 aircraft, distributed on 1,000 routes. This makes Ryanair Europe’s largest airline company. Only 15% of the traffic is created to and from Ireland.

Ryanair’s 39 bases in Europe

Michael O’Leary Ryanair’s CEO, Michael O´Leary, joined Ryanair back in 1987, and in 1991 he became a member of the Board of Directors. He has managed to brand Ryanair, through his 100% focus on cost-cutting measures, growth and not least his bold /outspoken announcements. Announcements which are often related to the rivals, the airline authorities or the EU. Announcements which investors should take with a grain of salt. This is not to say that his financial


expectations of Ryanair should not be taken seriously.

DCF summary

Sensitivity analysis

/Beta 0.85 0.95 1.05

/WACC 8.4% 9.0% 9.5%

Optimistic: 1 percentage point higher sales growth and profit margin 4.9 4.5 4.1

Basic 4.3 4.0 3.7

Pessimistic: 1 percentage point lower sales growth and profit margin 3.8 3.5 3.2

Hist. av. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Aver. 5 year

Sales growth -1.8% 15.0% 14.0% 4.0% 1.0% 4.0% 4.0% 4.5% 5.5% 3.0% 5.3% 22.1% EBIT margin 12.7% 12.7% 15.3% 16.0% 15.0% 16.0% 16.1% 15.3% 15.1% 14.8% 14.9% 14.1% Tax rate 10.0% 11.0% 12.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 13.0% 12.4% 8.0% WC as a % of sales -36.0% -35.3% -34.6% -33.9% -33.2% -32.5% -31.9% -31.3% -30.6% -30.0% -32.9% -36.7% CAPEX ( excl. write-downs) as a % of sales 14.8% 18.4% 8.3% 6.1% 3.3% -4.8% 5.8% 4.4% 6.5% 3.6% 6.7% 17.6%

Sales 2,889 3,322 3,787 3,939 3,978 4,138 4,303 4,497 4,744 4,886 4,048 2,184 EBIT before goodwill amortisation 367 422 579 630 597 662 693 688 716 723 608 312 Tax of EBIT before goodwill amortisation -37 -46 -70 -82 -78 -86 -90 -89 -93 -94 -76 -30 NOPLAT 330 376 510 548 519 576 603 599 623 629 531 341 Changes in working capital 25 -132 -137 -25 14 -25 -26 -33 -48 -14 -40 -156 CAPEX (excl. write-downs) 429 611 315 239 132 -199 250 199 309 178 246 392 Gross investments 454 479 178 214 146 -224 224 166 262 164 206 237 Free cash flow -124 -103 332 334 374 800 379 433 362 465 325 104

NPV of free cash flow 2,039 Risk-free interest rate 3.8% NPV of terminal value 3,810 Market risk premium 6.1% Value of operations, excl. options 5,848 Beta 1.0 Existing employee options/warrants -18 WACC 9.0% Future employee option/warrants/equities 0 CAP period 25 yrs Value of operations 5,831 Associated companies 0 Minority stakes 0 Others obligations 0 NV of net-interest bearing debt 52 Shareholder value 5,883 Number of shares 1,486 Fair value per . share 4.0


Disclaimer & Disclosure Jyske Bank is subject to supervision by the Danish Financial Supervisory Authority.

Jyske Bank's analysts are subject to the recommendations of The Danish Securities Dealers Association on the handling of conflicts of interest in investment banks. The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the material nor for transactions made on the basis of the information or the estimates of the report. The estimates and recommendations of the research report may be changed without notice. The report is for the personal use of Jyske Bank's customers and may not be copied.

This report is an investment research report. Conflicts of interest Jyske Bank has prepared procedures to prevent and preclude conflicts of interest thus ensuring that research reports are being prepared in an objective manner. These procedures have been incorporated in the business procedures covering the research activities of Jyske Markets, a business unit of Jyske Bank. Moreover, equity analysts at Jyske Bank cannot trade in companies and papers for which they prepare research reports. Jyske Bank may, however, hold positions, have interests in or business relations with the companies that are analysed. The research report has not been presented to the company prior to its release. The analysts receive no payment from persons interested in individual research reports. Read more about Jyske Bank's policy on conflicts of interest at www.jyskebank.dk/terms

Jyske Bank's share recommendations - current allocation

Allocation of recommendations, Danish shares (number) Allocation of recommendations, all shares (number)

Source: Jyske Bank Source: Jyske Bank

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Buy Accumulate Neutral Reduce Sell

Financial models Jyske Bank employs one or more of the following models: Discounted cash flow (free cash flow), Economic Value Added and the dividend model to determine the fundamental value of a company. The fundamental value is compared to a relative valuation based on multiples such as P/E and EV/EBITA. The recommendation and the price target are moreover adjusted for the expected news flow and the market sentiment based on knowledge of the industry and company-specific circumstances. Jyske Bank’s recommendations take into account the expected development in the equity market, the various sectors and company-specific circumstances. Risk Investment in this share is associated with a risk. Movements in the equity market, the sector and/or news flows, etc. regarding the company may affect the price of the share. See the front page of the research report for our view of the risk associated with the share. The risk factors stated and/or calculations of sensitivities in the research report are not to be considered all-encompassing. If the share is traded in a currency other than the investor’s base currency, the investor accepts an FX risk. In connection with an ADR or similar papers, the FX risk exists relative to the currency in which the underlying share trades. Update of the research report The planned update of the report will be prepared immediately upon the release of the company’s financial statements. See the front page for the initial date of publication of the report. All prices stated are the latest closing prices before the release of the report, unless otherwise stated.


Recommendation Return relative to the performance of the general equity market

BUY >5% ACCUMULATE 0 to 5% NEUTRAL 0% REDUCE 0 to -5% SELL < -5%

Source: Jyske Bank

Share recommendation concepts Our recommendations are relative to the market development and are based on an evaluation of the forecast return within the coming 12 months. The forecast return is the difference between the current price and our 12-month price target (the price target includes the projected dividend). A positive recommendation (BUY or ACCUMULATE) is based on expectations that an investment in the share will yield a return above the general equity market. On the other hand, a negative recommendation (REDUCE or SELL) implies that we expect an investment in the share to yield a return below the general equity market. Since our recommendations are relative and risk-adjusted, it is possible to compare our recommendations across sectors and risk categories. In addition, the potential is stated in absolute terms via our price target. It should be borne in mind, however, that the recommendation is the anchor. A BUY recommendation is a BUY recommendation until the recommendation has been changed, also in the event that price increases have taken the price "too close" to the price target. The future and historical returns estimated in the research report are stated as returns before costs since returns after costs depend on a number of factors relating to individual customer relations, custodian charges, volume of trade as well as market-, currency- and product-specific factors. It is not certain that the share will yield the stated expected future return/s. The stated expected future returns exclusively express our best assessment.

Ryanair - Buy

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