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1. Company Snapshot

1.a. Company Description

Norwegian Air Shuttle ASA, together with its subsidiaries, provides scheduled and charter airline services in Norway and internationally.As of December 31, 2021, the company operated a fleet of 70 aircraft.It is also involved in aircraft financing, leasing, and ownership activities; and cargo activities.


Norwegian Air Shuttle ASA was founded in 1993 and is headquartered in Fornebu, Norway.

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1.b. Last Insights on NAS

Norwegian Air Shuttle ASA's recent performance was positively driven by strong summer demand across its markets, which boosted its quarterly operating profit to a record $300.7 million. The airline's cost-cutting program and the strengthening of the Norwegian crown against the U.S. dollar helped counter financial pressure. Additionally, the company's unit costs decreased by 5% year-over-year. Norwegian Air's beat on profit estimates was a significant factor in its recent performance. The airline industry's slow recovery from the pandemic-induced slump also contributed to its results.

1.c. Company Highlights

2. Norwegian Group's Q3 Results Exceed Expectations with Strong Revenue Growth

Norwegian Group reported a robust third quarter, with revenue increasing by 6% to NOK 12.3 billion, driven by a 5% increase in Norwegian's revenue and a 9% increase in Widerøe's revenue. The group's EBIT margin expanded to 25.1%, resulting in an EBIT of NOK 3.071 billion. The earnings per share (EPS) came in at 2.4, significantly beating estimates of -0.05424. The strong financial performance was underpinned by a 2% increase in capacity, record-high unit revenue, and a 3% increase in passengers.

Publication Date: Oct -28

📋 Highlights
  • 25.1% Operating Margin:: Group achieved NOK 3.071 billion EBIT from NOK 12.3 billion revenue, reflecting strong cost control and operational efficiency.
  • Widerøe's 9% EBIT Growth:: Contributed NOK 274 million, up 9% YoY, driven by 9% passenger growth and high on-time performance.
  • Unit Cost Reduction:: Excluding fuel, unit costs dropped 6% YoY, reinforcing cost management under Program X.
  • First Dividend Payout:: Distributed NOK 0.9/share to 75,000 shareholders, marking a strategic shift in capital distribution.
  • Liquidity Strength:: NOK 10.5 billion liquidity, including NOK 7.9 billion cash, with equity ratio improved to 18.3% from 12-13.4%.

Operational Highlights

The group's traffic figures showed a solid operation, with Widerøe experiencing a 9% passenger growth and high on-time performance. The Program X initiative is delivering results, with a significant improvement in quarterly EBT and EBIT for the group. Geir Karlsen, CEO, mentioned that the company is not growing much in Norway due to increasing airport charges, highlighting the challenges posed by cost inflation and airport fees.

Balance Sheet and Cash Flow

The group's liquidity position is robust, with NOK 10.5 billion in liquidity and a cash position of NOK 7.9 billion. The equity ratio has improved to 18.3%, while net interest-bearing debt has increased by NOK 3.5 billion due to dividend, pre-delivery payments, and aircraft additions. The company has prepaid most of its commitments for payment of pre-delivery payments, with less than NOK 0.5 billion remaining until the first quarter of 2028.

Valuation and Dividend Policy

With a P/E Ratio of 7.82 and a Dividend Yield of 5.87%, the stock appears to be reasonably valued. The company's dividend policy is to pay a dividend, although the frequency and size have not been determined. The first dividend payout of NOK 0.9 per share was made to its 75,000 shareholders, indicating a commitment to returning value to shareholders.

Outlook and Growth Prospects

The company is guiding its unit cost to be flat compared to 2024, despite expected increases in cost elements. Analysts estimate next year's revenue growth at 7.3%. Geir Karlsen expressed interest in growing the base in Riga and exploring other markets in Europe, while also highlighting the growth in capacity to the Arctic region due to increasing Arctic tourism.

3. NewsRoom

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3 European Dividend Stocks Yielding Up To 11.5%

Nov -05

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Norwegian Air beats profit estimates boosted by strong summer

Oct -22

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How Norwegian’s Expanded Boeing 737 MAX Order Will Impact Norwegian Air Shuttle (OB:NAS) Investors

Oct -10

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This Analyst is Bullish on Boeing (BA) – Here’s Why

Oct -03

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Boeing Bags Large Orders From Turkish Airlines, Norwegian Air

Sep -26

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Sep -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.24%)

6. Segments

Passenger Transport

Expected Growth: 10%

Norwegian Air Shuttle ASA's 10% growth in Passenger Transport is driven by increasing demand for low-cost travel, strategic route expansion, and improved operational efficiency. Additionally, the airline's modern fleet and competitive pricing strategy have attracted more customers, contributing to the growth. Furthermore, the rise of online booking platforms and travel agencies has increased accessibility and convenience for passengers, boosting demand.

Ancillary

Expected Growth: 12%

Norwegian Air Shuttle ASA's 12% ancillary growth driven by strategic pricing, increased adoption of optional services, and enhanced customer experience. Key contributors include higher baggage fees, increased sales of food and beverages, and growing demand for premium seats and travel insurance. Effective revenue management and targeted marketing campaigns also support this growth.

Other

Expected Growth: 9%

Norwegian Air Shuttle ASA's 9% growth is driven by increasing demand for low-cost travel, successful route expansion, and improved operational efficiency. Additionally, the airline's modern fleet and competitive pricing strategy have contributed to its growth. Furthermore, the rise of online bookings and digitalization have also boosted sales.

7. Detailed Products

Low-Cost Flights

Norwegian Air Shuttle ASA offers low-cost flights to various destinations in Europe, North Africa, and the Middle East.

Premium Cabin

Norwegian Air Shuttle ASA offers a premium cabin experience with extra legroom, priority check-in, and complimentary meals.

Flex Tickets

Norwegian Air Shuttle ASA offers flexible tickets that allow changes to flight dates or times without incurring additional fees.

Checked Baggage

Norwegian Air Shuttle ASA offers checked baggage services for passengers with excess luggage or special items.

In-Flight Meals

Norwegian Air Shuttle ASA offers a range of in-flight meal options, including snacks and beverages.

Airport Lounge Access

Norwegian Air Shuttle ASA offers airport lounge access for passengers seeking a more comfortable and relaxing airport experience.

Travel Insurance

Norwegian Air Shuttle ASA offers travel insurance options to protect passengers against unforeseen travel disruptions or cancellations.

8. Norwegian Air Shuttle ASA's Porter Forces

Forces Ranking

Threat Of Substitutes

Norwegian Air Shuttle ASA operates in a highly competitive market, but the threat of substitutes is medium due to the lack of viable alternatives for air travel.

Bargaining Power Of Customers

Customers have a high bargaining power due to the availability of multiple airlines and travel options, making it easy for them to switch to a competitor.

Bargaining Power Of Suppliers

Suppliers, such as aircraft manufacturers and fuel providers, have a low bargaining power due to the airline's large scale of operations and negotiating power.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

The airline industry is highly competitive, with multiple players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 58.04%
Debt Cost 5.67%
Equity Weight 41.96%
Equity Cost 9.35%
WACC 7.21%
Leverage 138.35%

11. Quality Control: Norwegian Air Shuttle ASA passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

17.12$

Current Price

17.12$

Potential

-0.00%

Expected Cash-Flows