For anyone interested in Jet Fuel price this chart from the US Energy Information Administration is worth following. Current price about the same as 2006.
http://www.eia.gov/dnav/pet/hist/Lea...F4_RGC_DPG&f=D
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For anyone interested in Jet Fuel price this chart from the US Energy Information Administration is worth following. Current price about the same as 2006.
http://www.eia.gov/dnav/pet/hist/Lea...F4_RGC_DPG&f=D
Cheers Robomo - interesting, thanks for that.
Not sure if anyone else cares about this stuff, but as I am looking at it I will post it up here.
The latest EIA weekly report is in and its a biggy, with crude inventories jumping 2% in the US. Even with those rigs shutting down the volume is trucking along. According to Bloomberg crude inventory is now at an 80 year high.
Here's a nice graph showing how things are looking: http://www.bloomberg.com/news/articl...r-seventh-week
Also, who would be an Oil trader? After this report the price has actually gone up 3% today! Oh well I am confident it will sort itself out eventually as this Oil has to go somewhere however I must say the Oil Futures market beggars belief most of the time!
There may be a couple of reasons though... There is talk of an emergency Opec meeting: http://money.cnn.com/2015/02/24/inve...ing-oil-saudi/ however Saudi's aren't panicking, so likelihood of this happening who knows but a good sign for everyone is that demand from China is increasing: http://www.business-standard.com/art...2501450_1.html
It really is anyone's guess where it goes from here, but this oil does need to go somewhere.
Back to work for me, hopefully we see a strong AIR opening this morning.
Craigs just lifted their target price to $3.15 (from $2.68), reiterate BUY recommendation. They see underlying earnings before tax and VAH of $499m for 2015. Net earnings after tax of just over 32 cps this year.
The big cheese at Cullen Airlines has a grump about the profitability of Virgin(Under arm bowlers division).
http://www.smh.com.au/business/aviat...25-13ngvz.html
Boop boop de do
Marilyn
Morningstars auto valuation $2.80 HOLD
Decent turn around for Qantas reported today: http://www.smh.com.au/business/aviat...26-13oo45.html
Roger, I think you might be waiting a little longer before AIR SP is back on top of QAN, mate. ;)
Mate its a hard one to figure out. First let's look at their relative track record in recent years. No comparison really, QAN made a loss of $2.8 billion last year and this half it only made a tiny profit of just over $50m, (its first since the GFC) on its international operations. The vast majority of the profit came for domestic op's.
OTOH we have AIR's superb track record of growth in the last 2-3 years.
Next let's look at underlying earnings per share before tax for the half year
Qantas $367m / 2196m shares = 16.71 cps
AIR N.Z. $230m (excl VAH loss) / 1121m shares = 20.52 cps
Next let's look at statutory net profit after tax for the half year
Qantas $206m / 2196m shares = 9.4 cps
AIr N.Z. $133m / 1121m shares = 11.86 cps
Finally let's look at the outlook, dividends and growth
Qantas expects capacity to increase 1.5 - 2.0% this year but no dividend as they are rebuilding their balance sheet which one presumes implies its a bit stretched and no profit outlook which implies less confidence
AIR expects significant capacity growth, has increased the dividend by 44% and stated in the conference call that's because that's where they see growth in profitability for the year and obviously they seem very confident about their prospects for the foreseeable future.
Yet despite the above Mr market says Qantas SP deserves to trade at a premium to AIR's SP...go figure ??? A brave man would short QAN and double down on AIR :D
The other side of that is that Qantas made their recent underlying profit ($367m) on revenue of $8.1 billion. Air NZ got their profit of $230 on revenue of $2.4 billion. So net profit margin (or whatever you might call it) is 4.5% for Qantas and 9.6% for Air NZ.
Air NZ has better management which deserve those figures but there is only so high that the margin can be pushed.
Also, for sake of argument, assume that fuel cost drops by a third for H1 16 (which is really just assuming that it doesn't going back up again since H1 15 doesn't include much benefit from the current reduction in fuel price), profit for Qantas would be $721m higher and profit for Air NZ would $190m higher.
Based on the number of shares shown above, that would give:
Qantas $367m+$721m / 2196m shares = 49.5 cps
Air NZ $230m + 190m / 1121m shares = 37.4 cps
Obviously these are very rough figures and assume no other effects on profit between now and next year but they are just illustrating the point. The biggest opportunity for profit growth right now for both airlines is the falling oil price. And Qantas will benefit more from that than Air NZ.
I don't think it's unreasonable that Qantas should be priced as it is right now, although I won't be putting any money into them.
Good point. No question Qantas is a very highly leveraged company so there's more leverage to the upside if their recovery plan goes well.
Qantas Equity from their latest accounts is $2.73 billion. Net assets are $17.7 billion so equity ratio is only 15.4% :eek2:
Looks like all those years where they staunchly defended their market share at all costs have taken a toll. Only just had their credit rating outlook improved from negative to stable this month.
Plenty of possibility for things to go wrong with leverage like that as we saw last year with their loss of $2.8 billion. I'm not surprised you won't be putting any money into them, I wouldn't either with extreme leverage like that.
AIR by comparison look pretty conservative for an aviation business with approx. 50 - 50 debt / equity funding their assets.
Roger, interesting point about the equity ratio. That looks pretty bad for the red kangaroo. Certainly makes it a more risky bet.
Another one in the minus column for Qantas: it seems that the union thinks the airline is running as a charity. Now that there is a profit, the madness of job cuts must end! says the Transport Workers Union. Good luck with that.
http://www.theguardian.com/business/...-to-net-profit
Thanks for the link mate, good bit of dry humour for the day. The militancy of Australian unions is legendary to say the least. What a bloody gall they have. The company posted a $2.8 billion dollar loss last year for goodness sake. One year's more loss like that and it would wipe out the entire equity of the company !!!! As soon as there's a modest profit they put their hand out. What part of being reasonable don't they understand ? It would appear they've learned nothing from their colleagues in way the AMWU have bankrupted Ford and Holden into imminently shutting down.
Interestingly as an aside I crunched the numbers a while back and found the average worker at AIR N.Z. makes $104,000...not too shabby is it !!...any wonder they're an employer of first choice for so many people :) Classic case of all stakeholders benefiting from this IMHO. Now all we have to fix is those 17.8 inch width seats on the new Dreamliners and all will be well in the AIR world...or is this a cunning plan to encourage larger people to lose weight thereby doing their best for people's wellbeing... it seems to be working for me lol
Good article from Brian Gaynor on Air NZ and the SOE gentailers. "Stellar outcome for Government-controlled firms a notable exception"
http://www.nzherald.co.nz/business/n...ectid=11409400
Market seems content to price AIR on the basis that the oil price tailwind will persist for current year and maybe some of next year and who knows for the 2017, 2018 and 2019 years ? Market seems to think you can't put a value on those potential oil price tailwinds for future years but what if oil prices around $70 are the new normal ?
Current futures price for oil Dec 2018 at $68, (mid point of AIR's 2019 financial year) are pricing in big tailwinds for the foreseeable future !!
Implications for the potential for SP upside appear to be very good but to be honest its anyone's guess how sticky these lower oil prices will be.
http://www2.barchart.com/charts/futures/CLZ18
There are some interesting comments in the article below about UA looking at establishing an SFO-AKL sector and AA looking at the LAX-AKL sector (as unlikely as either might be), along with some other interesting tidbits.
http://www.stuff.co.nz/business/indu...ic-competition