Originally Posted by
modandm
Hi folks. Thought I would add my 2c before disappearing again for awhile. Still haven't sold a share.
Been a tough year obviously. I think most of us underestimated the impact to yields that the lower oil price/competition would bring. It's a global phenomenon. Certainly my FY17 earnings estimates have fallen from 40-45c down to 30-35c. That said the share price move down has been dramatic, leaving the company (imho) significantly undervalued, as has been the case for about the last 5 years (has it been that long...).
I certainly knew that FY16 was peak, and perhaps naively thought the dividend / cash-flow story would support the stock. Clearly the negative momentum and uncertainty on yields has mean't a tough devaluation, and risk being priced into the stock.
Where to from here then?
For the ST investor: Yield comparisons get easier in January, so should the operating stats firm up I would expect a re-rating towards 2.50, which values the stock on a reasonable 8x PE.
For the LT investor: Personally i'm not too concerned whether AIR make 28 or 32c in FY17 EPS. The question is sustainability and ideally growth in profit from there. If sustained (along with cash flow) there is a bonanza in FY19-20. I did a few figures and have spoken to the CFO, basically over the next 4 years (if things stay stable), AIR could pay $1.80 in dividends. That's based on a 50c special in FY19, and a 60c special in 2020 plus recurring twenty something ordinary. Over 5 years, you basically get your entire capital back, so if the stock is still at $2, you double your money (15% p.a). Any growth is cream on top.
I wouldn't be so tough on management either. Yes I agree they are too conservative, but with a government shareholder that's natural. As for the pay they are delivering so what's the problem? I would say we are lucky to have them. The new IR is good too.
Best, millimod :cool: