Valuation of Norwegian Air Shuttle ASA
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The purpose of this thesis is to estimate the share price of Norwegian Air Shuttle per 31.12.2018. In order to do so, we will analyze the strategic environment in which Norwegian Air Shuttle ASA operates and its financial position. This will be used as a basis for our financial analysis, forecasting and finally a valuation. We will at first give a proper presentation about Norwegian Air shuttle followed by a strategic analysis where we will analyze the external and internal environment that Norwegian operates in. Furthermore, we will perform a financial statement analysis, in this section we will introduce the peer group. We will under financial analysis reformulate Norwegian’s and make adjustments in order to make both Norwegian and the peer group comparable. Based upon this information we will conduct a forecasting section that will be used in the valuation. The valuation methods will be a discounted cash flow, multiple valuation and liquidation method. Norwegian faces both challenges and opportunities in the foreseeing future. The intense competition in the industry keeps putting pressure on ticket prices resulting in a lower revenue growth. However, Norwegian is in a situation where they are able to obtain market shares from competitors. In addition, the expansion in the long-haul market seems to be growing rapidly, especially in the US where they are one of the biggest carriers in New York and Los Angeles. Our valuation conclusion was that Norwegian´s share price the 31.12.2018 was overpriced according to both our DCF and multiple valuation. The share price per 31.12.2018 was 173,5 NOK. The liquidation method basically told us that if the choice was to liquidate the company, there would be nothing left to the shareholders. The observable share price from the discounted cash flow was 595 NOK and 132 NOK from the multiple approach. We arrived at a weighted share price of 502 NOK in section 7.0 Conclusion. In terms of the valuation we do believe that the sensitivity analysis would give a better understanding of both the potential and the risk that comes along with Norwegian Air Shuttle. Due to the concluded share price, as stated above, we believe the share price is undervalued and propose a buy recommendation on Norwegian Air Shuttle ASA with an upside potential of 140%, although we do want of high risk and volatility.
Master's thesis in Applied finance