The broker says the airline’s “Always Getting Better” customer service programme delivered better than expected improvements two months in a row at the end of 2014, while the firm is also set to benefit from the tumbling oil price.
Ryanair has hedged 90% of its 2014/15 fuel requirement at US$950 a tonne and 90% of its 2015/16 requirement at US$930 a tonne, locking in substantial savings, and more should be on the way when it negotiates its next set of hedging arrangements.
The balance sheet remains strong, with the company able to pledge to return €520mln of cash to shareholders in the form of a special dividend, despite an ambitious aircraft purchasing programme.
“Our target price of €11 would equate to an earnings multiple of 16.5x next year’s earnings and 15.1x 2016/17,” Panmure Gordon said, as it reiterated its ‘buy’ rating and announced its other conviction buys and sells for the first quarter of 2015.
Joining the list of companies Panmure Gordon is especially bullish about is Shire (LON:SHP), despite the Irish pharmaceuticals firm being jilted at the altar by US suitor Abbvie after US moves to close tax loopholes made the deal less attractive.
Since then, the emphasis at Shire has switched to execution, and Panmure Gordon reckons that although the share price has picked up since it crashed in the wake of the collapse of the Abbvie deal, it still does not fully capture Shire’s growth projects.
“With a break fee of US$1.6bn from the aborted Abbvie deal to hand and a new US$2.1bn banking facility arranged we expect Shire to boost growth by aggressive acquisition,” the broker predicted.
The company’s John Crane division, which provides products and services to global energy services customers, has been a star performer in recent years but Panmure Gordon reckons that after a decade of growth, investment in the energy sector is set to fall sharply.
Meanwhile, Smiths Medical is also in structural decline and has a weak balance sheet, in Panmure’s view.
The opportunity to create value through breaking up the company has passed, the City firm reckons, although a change in management may trigger new hopes of a break-up.
If you fancy a bet, then Panmure Gordon suggests you don’t put it on 888 (LON:888), the online gaming firm.
The casino games operator had a strong 2014, but Panmure Gordon reckons the outlook is set to get work due to increased competition in the UK.
“With operators likely to defend market share aggressively, we feel 888 is higher risk than its peers due to its casino focus, with casino customer higher churn relative to other online gambling products, and particularly sensitive to any reduction in bonuses or marketing,” Panmure postulates.
Other companies getting the thumbs down from Panmure Gordon are Weir, Petra Diamonds and RSA Group.