"Based on the findings, we estimated the stock price of Norwegian Air Shuttle ASA to be NOK 283,1. On 31.03.2016 the stock price of Norwegian Air Shuttle ASA was NOK 311,5 and therefore our claim was that the stock is overvalued. Our recommendation is then to sell the stock.
Stock Price today, 05. 01. 2017 is NOK 286.3
To answer the problem statement, we will do a fundamental valuation of Norwegian Air Shuttle ASA.
First we did a strategic analysis, consisting one external analysis and one internal analysis. This gave us the foundation for predicting future development and environment of the company.
From the external analysis we found that the European market is driven by low margins and fierce competition. We also tested our findings with a sensitivity analysis to find what factors will have the biggest effect on the estimated value per share.
The sensitivity-analysis showed us that our model is highly sensitive to the fuel cost and the currency combined due to high volatility and sensitivity towards the cost of debt.
The sensitivity towards the cost of debt is driven by NAS having a high debt to equity ratio."
About Debt to Equity Ratio
Leverage ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. A low debt to equity ratio indicates lower risk, because debt holders have less claims on the company's assets.
A debt to equity ratio of 5 means that debt holders have a 5 times more claim on assets than equity holders.
A high debt to equity ratio usually means that a company has been aggressive in financing growth with debt,
and, often results in volatile earnings as a result of the additional interest expense and a driver of stock performance / risk.
S A S AB's Debt to Equity Ratio (Quarterly ) : 0.00 for July 2016.
Norwegian Air Shuttle Debt to Equity Ratio (Quarterly): 5.83 for Sept. 2016.
Norwegian Air Shuttle Debt to Equity Ratio ( Annual ) :
Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15
0.99 > 1.38 > 2.19 > 2.28 > 2.37 > 6.30 > 6.61
Norwegian Air Shuttle And Companies / Investment Rating = Baa3
Investment Grade: Aaa → Aa1 → Aa2 → Aa3 → A1 → A2 → A3 → Baa1 → Baa2 → Baa3
Long-term Corporate Obligation Ratings are the relative credit risk of fixed-income obligations with an original maturity of 1 year or more.
The ratings reflect both the likelihood of default and any financial loss suffered in the event of default.
Global Credit Research
An indirect, wholly-owned, Irish-registered, subsidiary of NAS, Torefjorden DAC, will own the aircraft and lease them to NAS' Irish-registered airline, Norwegian Air International Limited ("NAIL") on 12-year operating leases. Torefjorden will issue the equipment notes owned by the Pass Through Trusts. The payments made by NAIL on the operating leases will fund the payments due on the equipment notes, which will fund the amounts due on the Certificates. Torefjorden is a designated activity company.
Its activities are limited solely to owning and leasing the specific aircraft in the transaction and issuing the equipment notes. NAS will absolutely and unconditionally guarantee NAIL's obligations to Torefjorden in respect of each Lease, and Torefjorden's obligations to the Trusts under the equipment notes. If NAIL cancels the leases, Torefjorden must redeem the equipment notes. Please see our detailed report on this transaction, "Norwegian Air Shuttle: 2016-1 Enhanced Equipment Trust Certificates Financing of Boeing B737-800s" available under Norwegian Air Shuttle ASA for further background about this inaugural EETC of NAS.
The structure crosses three legal jurisdictions (Ireland, Norway and the United States) and it contains several Norwegian group entities, including one SPV (see below).
Torefjorden DAC (Torefjorden - an Irish SPV) will issue senior and junior loans (equipment notes made individually on an aircraft-by-aircraft basis) to partially fund a purchase of 10 737-800s. Torefjorden is a wholly owned subsidiary of Arctic Aviation Assets Limited (AAAL - NAS's wholly-owned Irish leasing subsidiary). Torefjorden will fund the remainder of the aircraft balance by either an equity injection or intercompany loans from AAAL.
The aircraft will be leased (triple net operating leases) to Norwegian Air International Limited (NAIL - an Irish-registered, airline operating company and a wholly-owned subsidiary of NAS).
Last edited by marvelman; 6th Jan 2017 at 20:06.
Reason: Norwegian Air Shuttle Debt to Equity Ratio Annual