AIR - Air NZ.

[Marilyn Munroe]

Has the good profit result announced by Cullen Airlines given Marilyn a pie in the face? A vol-au-vent maybe.

Cullen Airlines has been lucky. Their biggest competitor Queer and Nasty Airlines is run by a bunch of clueless idiots, and there has been no customer push-back from their roll out of the thrombosis class cabin layout.

Their are continuing concerns. The use of Airbus A380's by competitors on North American routes would see customers deserting Cullen Airlines. Jetstars Asia strategy is stuttering leaving them with a fleet of seriously underutilised A320's. These aircraft could be redeployed in Aoteroa domestically or criss crossing the ditch. Whether Boeing 787's are the right aircraft is still unknown, and of most concern Cullen Airlines are bankrolling the ruinous capacity war between Virgin(Under Arm Bowlers Division) and Queer and Nasty Airlines across the ditch

Queer and Nasty Airlines are due to to announce their profit result later today. It is widely expected to be a shocker. If it forces change on this airline it may not be to Cullen Airlines advantage.

Memo to John Key, sell the lot to Etihad, after today the taxpayers will get a better price.

Boop boop de do
Marilyn

[modandm]

thanks, to answer your question I would say yes things are going to get even better. I expect strong earnings growth to continue as the company expands. Airlines have high operational leverage, therefore when economies improve and revenue growth is strong, profitability rises at a rapid rate. In AIR's case by about 25%pa over the next few years. Combining that with the company's very low valuation vs peers, relatively strong competitive position, and high yield you can see why I like the stock so much.

Here are some more quick thoughts post conf call:

Very much as expected, maybe a touch better in some areas. A very credible result considering low revenue growth this year and the significant one off labour costs (redundancies, and retraining). Otherwise very little new or of surprise,

Key positives for me are:

- comments that domestic yield environment is improving
- outlining 8% FY15 capacity growth (previously they have used 7-8%),
- FX hedging for next year is building up nicely at 82c+ NZD/USD

A touch disappointed on the dividend, but looks like they want to do 4.5+7.5 = 12, to make it 50% even increase for the year. Maybe a special occurs at full year - but don't count on it. Unfortunately there is a bit of management conservatism in this regard.

FY 15 is going to be super! I can pick a FX and jet fuel cost, the difficulty is what will the 8% capacity growth translate to revenue? If you assume constant load factor and yield the answer is 8%, which would deliver c.30c EPS! If you say load factor and yield detract about 2% then using 6% revenue growth you get then about 25c EPS.

I then value the company at 9x forward PE or $2.35. I would say this is conservative. You could use a higher multiple or higher earnings number and get $3.00 easily.
Also this valuation ascribes zero value to VAH - worth c.25c NZD per share (unlikely to see a return on that in the next few years though...)

Happy holder.

[Schrodinger]

http://www.watoday.com.au/business/a...227-33j48.html

Lol QQ Australia...

[Marilyn Munroe]

I'll sumarise the loss announcement of Queer and Nasty Airlines CEO Allan Joyce so you don't have to.

We are in more poo than an outback dunny, other than treating those who work for the airline as annoying blowflies I don't know what to do.

But I deserve to keep my job.

Boop boop de do
Marilyn

[Marilyn Munroe]

Cullen Airlines Aussie step child, Virgin(Underarm Bowlers Division), has just announced it has flushed $A83.7 million down the dunny.

http://www.asx.com.au/asx/statistics...idsId=01496443

Boop boop de do
Marilyn

[silverblizzard888]

In such a forward looking market, why is the stock price not higher right now?

[Snow Leopard]

In such a forward looking market, why is the stock price not higher right now?

Because it is a forward looking market !

Best Wishes
Paper Tiger

[silverblizzard888]

Because it is a forward looking market !

Best Wishes
Paper Tiger

Surely the prospect of 300 million profits for the year would cause the price to be much higher than it is now. The P/E is quite low right now, for such a forward looking market, would that possibility not be accounted for. At $1.80 that is still a very cheap price when comparing the P/E to other stocks.

[Snow Leopard]

Surely the prospect of 300 million profits for the year would cause the price to be much higher than it is now. The P/E is quite low right now, for such a forward looking market, would that possibility not be accounted for. At $1.80 that is still a very cheap price when comparing the P/E to other stocks.

Well that normalised $300M+ before tax will be $210M+ after tax so it is already on a P/E of 9.42 or better.
Take the SP to $2.10 and the P/E is 11.0

Then where does it go?
Airline profits tend to be all over the place and the further forward you try and predict the greater the possible variations, but you start factoring in a major downturn.

So they trade on nice low multiples to counter the higher risk (than more boring stocks).

Best Wishes
Paper Tiger

[silverblizzard888]

Not to spike any false excitement but generally the second half has been at least 80% of the 1st half (as shown on previous two years), so if we take that the 1st half of 140 million profit, we get 112 million for the 2nd half, which would give a nice estimate of 252 million full year profit.

Based on a P/E of 10 we'd get $2.27 or $2.497 on a P/E of 11.