Air up almost 8%. Ouch to the shorters
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Air up almost 8%. Ouch to the shorters
I was on the Sharesies FB page and there is unbridled buy-the-dip enthusiasm for AIR - heart leading the brain I fear - one fellow even asked for a couple weeks holiday pay in advance to invest. Heaven forbid they use any sort of leverage; re-mortgage for shares anyone? Good luck them all. Most of these guys have only been on the game for a couple months and have never experienced any sort of real correction
Oh dear. Up 10%
Thanks mate, I always enjoy your well thought out posts too !
Thanks, Same for you mate, I just wish you had more time to post. (I know you're a very hard working and very busy man).
Welcome back to the dark side :D
Very brave to buy back into air new Zealand when the fallout looks to continue for some time, and the effect on the company could be far reaching. This is one company where the panic selling was justified.
Of course, my opinion. But something for everyone to consider. Nothing has changed to the company for the better. The company itself has forward planned its reduced flights up to September. Europe has so many borders, the virus will be difficult to contain. So it would appear travel restrictions for travellers coming from overseas hasn't even begun to be extended. This is one company that unfortunately is going nowhere fast. I know its hard to accept when you are invested, I've been there with other companies in the past. But just where is the good news.
I could offer a totally different picture if you like. Whether I believe it or not does not matter. The virus will be about a half year blip. So AIR profit will be devastated for this half year period. However some competition is going to fail, meaning larger market share for AIR post this half year period. Air will also profit from the oil price plunge when they forward risk their 2021/22 fuel futures. Since the discount rate is currently so low, the DCF valuation of Air will not be adversely impacted by negative half year earnings, let alone negative FY earnings, if you believe AIR has a future post 2021.
Well blackcap, I think you are right, there is a real possibility if they can weather the current storm for six months, then this will be a recovery stock. But it will get worse before it gets better. The question is can they financially sustain the unprecedented situation for six months without going back to shareholders for substantial capital injection. Really money down the drain to maintain the brand and infrastructure. Too many unknowns. So any recovery of earnings will be on a much larger capital base. The government will not let it go under. The bad news is also that its not just Air New Zealand's problem. It belongs to the whole airline industry worldwide. Excess planes will have no market value. Airline manufacturers will take many years to increase their depleted manufacturing levels.
Believe or not, AIR NZ will come back.
AIR NZ is one of the best airline companies in the world. As per my research, its operating performance(EBITDA) has not made loss over the last 20 years(1999-2019). During the period, many airline companies made huge loss. Some of them filed bankruptcy, ie, Japan Airline, Southeast Airline, etc.
So we need to put our faith on AIR.
Absolutely - AIR will be back. However - faith (as well as hope) is not a good investment strategy, and we don't know whether they will need a cash injection (quite likely in my view) - and how much dilution this will provide.
As some of the other posters - I think that it will get worse before it gets better. What is unclear, is whether the current price levels will look a good BUY when reviewing the decision in say 2 or 5 years.
I think however that it is a rather safe bet to predict that the share price will be lower in a month or 2 from now.
Some reports suggest up to 50% of people are not turning up to check in for their flights. When some of these flights and forward accommodation bookings run to many thousands of dollars what does that suggest about the level of fear out there ? New bookings have, according to Grant Bradley aviation commentator for the N.Z.Herald, "fallen off the face of a cliff" The company has just withdrawn guidance because it cannot possibly measure the extent of this virus.
Nobody can predict the future with any great certainty but what we do know is that AIR is an incredibly low margin business with very high fixed costs and is facing a prolonged collapse in demand because people fear, (not their financial situation like in the GFC), but Death !
I have worked out AIR average eps is 0.215 over the last 15 years. PE range between 7-13. Take the midpoint of PE at 10. The current SP is probably the fair value. So I started to buy AIR under $2 at small parcel. And the more it drops, the more I'll buy.
AIR NZ Share Price EPS PE Ratio Low High Low High 2019 2.23 3.41 0.24 9.29 14.21 2018 2.86 3.82 0.347 8.24 11.01 2017 1.71 3.3 0.34 5.03 9.71 2016 2.02 3.26 0.413 4.89 7.89 2015 1.75 3.02 0.292 5.99 10.34 2014 1.32 2.29 0.239 5.52 9.58 2013 0.86 1.55 0.166 5.18 9.34 2012 0.84 1.2 0.065 12.92 18.46 2011 1.01 1.54 0.075 13.47 20.53 2010 0.86 1.5 0.076 11.32 19.74 2009 0.75 1.3 0.02 2008 1.07 2.7 0.21 5.10 12.86 2007 1.08 3.13 0.205 5.27 15.27 2006 1.03 1.43 0.094 10.96 15.21 2005 1.3 2.05 0.21 6.19 9.76 2004 0.48 3.13 0.24 2.00 13.04 3.232 111.37 196.95 /15 /15 /15 Average EPS 0.21547 Average PE 7.42 13.13