AIR - Air NZ.

[OldGuy]

Noodles. How do you get such low eps?? It's currently late 40s but you have it at about 7 cents for 2016. That's about 3 or 4 times lower than the forecast divvy alone!!

[Beagle]

I sent this communication to investor@airnz.co.nz this evening, (acknowledge this is probably not my best work because I am tired and its a Sunday night but I have given it my best shot) and would encourage you to add your thoughts in support to the same e.mail address so hopefully we can effect a positive change.

Attention Tony Carter,

Please refer : http://www.airnewzealand.co.nz/asset...ing-Policy.pdf

Hi Tony,
You may remember me, I was the bloke asking lots of curly questions at the last Annual meeting and we spoke briefly after the meeting.
I am writing on behalf of a significant number of small shareholders that I have spoken with. There is general concern about recent senior management share sales in the week or so leading up to the release of information contained in the investor day presentation.
Shareholders spoken with note a significant SP decline in the four trading days of the week ending Friday 29th April (a drop of 32 cents per share) at a time that senior management were selling.
We also note a significant senior manager sale on Monday 2 May 2016 the day before the investor day presentation that we note was a price sensitive information release that contained what amounted to a profit downgrade for FY17.
We also note that Virgin issued a shocker quarterly result on Monday 2 May 2016 and there is speculation that senior management may have been privy to the general outlook at Virgin not being as healthy as the general market consensus view.
The overall tone of these transactions whether intended or not gives the impression of management selling just before the release of negative news and to be frank it is not a good look.
Some shareholders, myself included, struggle to reconcile senior management selling in the few trading days leading up to the price sensitive FY17 profit downgrade as being consistent with the company's own security trading policy, (see link above for your ease of reference) and in particular note that senior management were obviously involved in the preparation of the investor day material and were well aware that the company was about to issue a profit outlook that for all intents and purposes amount to an outlook downgrade.
I note that while it is conceded that AIR themselves had not previously issued formal guidance for FY17, nonetheless guidance when first issued on 3 May 2016 as part of the investor day presentation was materially lower than existing consensus analyst expectations. I further contend that a reasonable person would expect Air's senior management to be cognisant of that fact.
First things first. My primary goal here is to try and help the board improve its security trading policies so that Directors and Management avoid getting themselves into what could be seen as or perceived to be an insider trading situation.
May I respectfully make the following suggestion for an improvement to your existing security trading policy.
Where senior management are in the process of preparing investor material or any other press release that they or any person would reasonably consider to be price sensitive, (with the exclusion of normal monthly operating statistics) there needs to be a ban in place on securities trading.
I am hopeful the board are anxious to uphold the highest ethical standards so whether real or simply perceived this sort of general market perception is avoided in the future.

I also note that management selling occurred just before the shocker Q3 Virgin result and shock outlook statement for that company. This serves to only amplify shareholders concerns and taken together its a very poor overall look.
Please consider the above and advise if the board are prepared to consider strengthening the securities trading policy along the lines suggested above so as to ensure management are both seen too and perceived to be seen too upholding the highest ethical standards in the future.
The effort I have made here is I hope a catalyst for an improvement but if not as you would expect I reserve my right to lodge a formal complaint with the NZX or FMA.
I am happy to take your call to discuss informally once you've had a chance to discuss with the board.
Many thanks for your excellence governance and hopefully you good folks can see from a shareholders perspective where I am other shareholders are coming from in this matter.
Thanking you in anticipation of your careful consideration of this matter.
Yours faithfully

I still have the upmost respect for the board so hopefully this is a catalyst for positive change. If not maybe another New Zealand Shareholder association tandem effort is required.

Please folks, if you want change and a more level playing field, PLEASE make the effort to add a few words. Even a simple e.mail to the e.mail address noted above saying you support Roger's recent communication might be what it takes to make a positive difference.

[winner69]

Be good to hear from modandm and his forecasts / valuations - usually spot on

[Beagle]

Be good to hear from modandm and his forecasts / valuations - usually spot on

Yeah it sure would be great to hear from him. He's sorely missed on this thread lately.

[BeeBop]

Have just sent a one line email in support of yours (as above)

[see weed]

Good on you Roger and Beebop. I don't have AIR at the moment. But give im heaps, take im to the FMA.

[winner69]

Model update

Been through the FY15 results in detail now, I have to say operating expense growth was higher than I expected, while the costs of the new fleet are proving lower - good deal those 787s!

I have re-adjusted my assumptions line by line, and also incorporated higher growth rates for labour costs, 6% and 5%, reflecting capacity increases, rate increases, and the bonuses staff are now getting (well deserved!). I have also slightly boosted the contribution from VAH expected, and the tax rate to reflect VAH contribution.

For fuel costs this year I use 70 USD bbl, into wing (includes crack and delivery). For NZD/USD on this calc I use 72c which is somewhere between spot and the hedges (80c). I use 70 bbl and 63c for FY17. I include hedging costs/losses.

I then use 3 scenarios for pax revenue growth (which reflects capacity and group wide yield after FX)

Bear case 4% then 2% gives EPS 44c then 35c
Base case 6% then 2% gives EPS 48c then 40c
Bull case 8% then 3% gives EPS 54c then 48c

At this stage in the year we are tracking at 10.1% growth so ahead of bull case. I expect this to fall as comps toughen post December, but this will be offset by FX gains and Argentina too so who knows exactly where we end up. Blue sky 10% gives 57c in EPS.

My valuation is now set 1 year out at 8x Base case FY17 giving $3.30 target price plus 25c in dividends = 40% upside. For longer term holders like myself there is further special dividend potential in FY17 and FY18.

Lets hope operating stats remain strong.

All the best

-mod

Financials playing out as per mo's forecast - the bull case that is

That post was back in October and even then mo had F16 as peak pfit with a decline in F16

Even his base case valuation was $3.30 (bull case not stated but prob around $3.70 odd)

This week will be a good one for the AIR share price

[percy]

this week will be a good one for the AIR share price

Well if it is it will be going against the tide, as the share price at $2.36 is well below all the EMA moving averages.
50 day EMA,$2.79
100 day EMA,$2.81
200 day EMA,$2.78
499 day EMA,$2.54.
Good luck to buyers and holders.

[winner69]

Well if it is it will be going against the tide, as the share price at $2.36 is well below all the EMA moving averages.
50 day EMA,$2.79
100 day EMA,$2.81
200 day EMA,$2.78
499 day EMA,$2.54.
Good luck to buyers and holders.

Numbers Shows you how AIR has hardly gone anywhere for 2 years, most of those lines flat eh - averaging $2.74 odd and cycling between $2.35 and $4.20 odd

Last week a spike down - this week the start of a cycle up

No good luck needed

[percy]

14th April $3.02,
18th April $2.86
29th April $2.46
6th May $2.36
Just a steady downtrend to me.