Ryanair price dip ‘a chance to invest’

THE recent weakness in Ryanair’s share price should bee seen as an opportunity to buy stock in the company brokers Dolmen Butler Briscoe said yesterday.

Dolmen analyst Stuart Draper said they had downgraded its rating on the shares from buy to hold when they hit €6.60 but had now set a new price target of €7 for the shares which traded at €5.80 yesterday.

“We believe the shares once again offer an attractive entry level,” he said.

“Our new 12-month price target of €7 (21% upside) takes into account that the Irish airline’s earnings growth should start to accelerate again in 2004, and is based on 15x forward earnings per share of 47c,” he added.

The European Commission has said a decision in its Charleroi airport investigation is expected towards the end of October. Mr Draper said there is a high probability the ruling will not be particularly harsh on Ryanair.

“As a result, the resolution of the issue, in removing a major source of uncertainty, could result in some buying of the shares,” he said.

Mr Draper said it is also difficult to see the ruling having anything but an immaterial effect on Ryanair’s earnings.

“Even assuming that the company’s marketing and airport charges rose to Easyjet’s level for state-owned airports, Ryanair’s EBIT margin would still only reduce by c. 3/4%. Any fines payable would also be likely to be immaterial given the Irish airlines’s massive net cash position,” he added.

Goodbody airline analyst Joe Gill who also had Ryanair as a buy yesterday, identified another low cost airline investment opportunity in Canadian carrier WestJet. “WestJet offers similar point-to-point services as Ryanair, but now plans Direct TV services akin to those of jetBlue. That should embolden load factors and drive earnings faster off a 2003 revenue estimate of circa €580m. All that for less than 17x ‘04 earnings and after a C$125m equity funding in the past month,” he said.