www.flybe.com

Looking ready to break through 120p - next target on the chart 140p

Breaking out, next target on the chart 140p.

Is Flybe Group PLC Taking Off?
By Kevin Godbold - Tuesday, 23 September, 2014 | See also: FLYB

There’s no such thing as a buy-and-forget investment in the airline sector but, when we find ourselves apparently mid-macro cycle as now, the economic backdrop seems relatively benign for a shorter-term investment.

What better candidate for a punt in the industry than a once down-on-its-luck airline that’s in the middle of a turnaround and expansion programme with a determination to adapt to changing business conditions in the industry in order to succeed? Such is Flybe Group (LSE: FLYB), which resides in the FTSE Small Cap index.

Crashed and burned
Flybe arrived on the stock market at the end of 2010 and the shares crashed and burned, falling from around 320p to 40p by April 2013. There was trouble in the business such as unprofitable flying routes, spare aircraft capacity and inefficient systems and operational methods.

The firm was making losses, and its constrained cash flow and weak balance sheet forced it to finance its aircraft with expensive lease arrangements rather than financially efficient loans. An unvirtuous circle set in that created even deeper losses — things looked bleak and something had to change if the company was to survive.

Conditions were perfect for change and reform, and the share price was sufficiently bombed-out for new investors to benefit from a turnaround situation – a great set-up for a turnaround investment as long as something drives change and, with Flybe, it has.

Turning things around
A determination to reform seized the directors at Flybe and things started to improve. 2013 saw change at the top with a new chief executive and a new chairman who brought a new clarity for the vision of the enterprise. Flybe wants to be Europe’s best regional airline, it reckons, and improving financial results in 2013 suggest it is now heading in the right direction.

The shares began to respond to the firm’s changing fortunes, moving from 40p in June 2013 to just under 150p in April 2014. Investors seeing the potential last year have done well, but the best may yet be to come, as during March this year Flybe raised around £150 million in a fully underwritten placing and open offer.

That’s quite a big capital injection for a firm with a market capitalisation of £262 million at today’s 121p share price, but it puts a floor under the weakness of Flybe’s capital structure and provides the funds for the firm to drive through the financial and operational efficiencies it needs to prosper.

Flying high
Flybe nudged into profitability with its full-year results released in March this year. City analysts following the firm predict a 500% increase in pre-tax profits by March 2016, which puts the firm on a forward P/E rating under seven.

Naturally the shares fell back a bit when the fundraising was announced, but over the last few days they’ve been creeping up. My guess is that the shares have further to travel as operational efficiencies and changes gather pace. To me, Flybe looks attractive right now.   

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A strong recovery in profits followed restructuring at this firm, and the directors predict double-digit margins driving a profits surge in the years to come.

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Looks to be plenty of potential here to take out its previous top and rather quickly.

Thank you gf, appreciate your analysis.

Low volume.
2517

a few days old but cant find it on the thread.

Buy Flybe at 116.5p – price target 250p (short term) 500p (3 years)
BY CHRIS OIL | SUNDAY 21 SEPTEMBER 2014

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Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Following my recovery play holding of last week I promised to reveal my second private non-oil share this week – here goes it is Flybe (FLYB). This is a perfect hedge for anyone with large oil investments or a recovery play in its own right. It’s a sort of EasyJet in the making with a £250 million market cap -I reckon that should be well over £1 billion.

Flybe is a United Kingdom based regional airline company with flying operations based out of Britain and also in Finland through a jv- it had a fleet of 96 aircraft at the time of its accounts. However the recent announcement of downsizing the fleet comes as the airline has been pushing through a turnaround plan designed to restore it to profitable growth. By moving from heavy fuel using jets to more efficient Bombardier aircraft should enhance future profitability.

The City is starting to get excited about major expansion plans at London City Airport and with three new routes launched October 27th to Exeter combined with new flights to Manchester, passenger numbers should exceed three quarters of a million in 2015.

Conservative broker forecasts are for £592 million in revenue and a £20 million pre-tax profit in the year to 31 March 2015 and the following year £629 million in revenue with a profit of £50 million.

In the long term this is another EasyJet in the making and a lower risk than any oil plays.

So why are the shares so undervalued? The firm nearly went bust under the last management however the balance sheet has been sorted thanks to a placing at 110p and that £150 million of cash provides a floor in the share price and makes the company one of the best financed businesses around today. The aim is to deploy capital to own aircraft with secured loans rather than via full operating leases.

Given the new management are ex EasyJet they know exactly what to do to drive Flybe back to historical highs. This is a real turnaround situation on multiple fronts including cutting uneconomic routes and slashing 1,100 jobs – total annualised cost savings to date are £70 million.

I have been to a few investor presentations and CEO Saad Hammand wants to turn everything purple, offering free chocolates and a 60 minute promise on delayed flights to drive increasing repeat business. Remember that the big boys are leaving this market open to Flybe to gain market share as they have moved to compete with each other on overseas destinations. TTV adverts are getting more exposure as well which all helps increase the brand awareness with customers feeding through to the bottom line. The company makes the point that on most of its routes it is faster and cheaper to fly Flybe than to use car or rail. Next week I am going to test this theory out including some overseas flights.

The company is nearing the end of a phased cost review on its training school which I hope it will float off or semi privatise to reduce costs and increase cash. The (MRO) maintenance operation which services 3rd parties as well will probably be held onto as I cannot see its worthwhile selling it off considering the financial benefits of maintaining the company’s own fleet.

In terms of fuel costs, Flybe is hedged 60% and is benefiting from the downturn in oil prices on the 40% unhedged part of its book which should feed into profitable numbers in the next results on the 12th November. A capital markets day on the 28th will hopefully hint at the growth for the future off the back of the increased passenger numbers this summer.

In summary the company is mainly a domestic airline so currency or conflict abroad has less effect on it than on others in the sector. But it has the potential to generate large profits and cashflow and this is far from discounted.

Until the next time more ramblings from the castle can be seen @chrisoil

- See more at: http://www.shareprophets.advfn.com/views/7910/buy-flybe-at-1165p-price-target-250p-short-term-500p-3-years#sthash.jPl3o0pj.dpuf

i've just tried booking a notional flight Soton/Bergerac/Soton and gave up as it was user unfriendly

that's bad news and stupid

Thats just your opinion, lets face it your not very IT freindly yourself are you, be honest.

not hugely, but i'm not a complete dinosaur either
for a cheapo airline (and others) it is imperative that their website is user-friendly as the last thing they want or need is to put off prospective customers

Bloody Hell Cynic Ive just tried what you did above and its gone through straight away, they have saddled me with a return ticket and taken it from my debit card......ohhhhhh
shit.

Enjoy your trip gf ha!ha!
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bet it's not refundable either .... serves you right!

my guess is that they don't have flights to/from Bergerac every day, but it was not apparent nor on what days they do

I cant get through on the phone now, shitey lot.

I didnt expect it to take my money after what cynic said. ohhh shit.

sorry but hohohohoho!
still enamoured with flybe are you?

that's the trouble with things that look cheap; they're expensive!

:-)

Its you you pillock nothing wrong with the IT. Bloody phone ques.

That is sooo funny gf, I'm still laughing. Sorry, he! he!
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i'm not the pillock; you will recollect that it is YOU who have donated your money to them, not me :-)

f me still cant get through.