AIR - Air NZ.

[Blue Skies]

Looking forward to the annual result on 22 August and the juicy dividend in Sept.
Interesting tidbit for anyone contemplating this for dividend income. Chris Luxon mentioned at the half year result conference call that AIR had only reduced its dividends twice before. After 9/11 and the GFC.

22 cents fully imputed per annum = 30.56 cents per share gross and on $2.75 that's 11.1% ! I think barring a major exogenous shock of the type referred to in this post, that's sustainable for the foreseeable future and with interest rates so incredibly low, basically in unchartered territory, its highly attractive for dividend hounds.
Sure there's risk, but there's risk in every share.

Couldn't agree more, amazing dividend & a place for Air in every portfolio (def mine anyway & the dividends over the years have basically almost given me free shares) . Often compared/put in a basket with all airlines in general, but it's not. Healthy part of NZ inc depends on tourism & due to our relative geographical isolation therefore a strong AIR. (i.e. govt would never allow a situation where we were solely at the whim of overseas carriers)

[iceman]

Couldn't agree more, amazing dividend & a place for Air in every portfolio (def mine anyway & the dividends over the years have basically almost given me free shares) . Often compared/put in a basket with all airlines in general, but it's not. Healthy part of NZ inc depends on tourism & due to our relative geographical isolation therefore a strong AIR. (i.e. govt would never allow a situation where we were solely at the whim of overseas carriers)

Good point that I have highlighted above in your post Blue Skies. One issue that I have not seen mentioned much on this thread but deserves a mention is the strategy followed by Tourism NZ. They have deliberately stayed away from low cost carriers in their promotions and based their strategy instead largely around legacy carriers, even assisting them in various ways to start up new routes in and out of NZ.
Many other countries fighting for the tourism dollar have done it differently and encouraged lots of low cost carriers, many of whom are now going bankrupt or are withdrawing from unprofitable routes.

I think Tourism NZ has done very well with this strategy for NZ Inc and along the way assisted more reliable legacy carriers like AIR NZ, Qantas, Hawaiian, Southern China and more. This has also given local tourism operators much more certainty which can be seen in the fact that even though tourism growth has slowed in NZ and the World, last numbers from Statistics NZ show a 2% growth in the last 12 months, while many countries are experiencing big declines. Steady as she goes.

[RTM]

So based on all the above, which I largely agree with, it would seem that the share price might need to increase a bit. $3.00, $3.20 ?
Disc: Holding @ $2.24.

[Beagle]

So based on all the above, which I largely agree with, it would seem that the share price might need to increase a bit. $3.00, $3.20 ?
Disc: Holding @ $2.24.

That's the $64,000 question !

On one hand we have seen a real flight to safety and have all noticed the share prices of safe gentailiers and REIT's move considerably northward so the temptation is definitely there to think that a stock with a reasonably safe assurance regarding yield, has been overlooked. But what does reasonably safe assurance regarding yield mean in this world we live in today ?

On one hand we have the 10 year Government bond rate having declined by over 150 basis points in recent months, which itself has valuation implications northwards, a PE of about 1.5 more, all other factors being equal should follow which suggests a rerating is possible. But are all other factors remaining equal ?

On the other hand when we look at the reasons for that massive shift in the risk free rate, (fears of a global trade war) and taking into account the possible effect on AIR its easy to make the case that the extra risk of same counteracts the above possible valuation implications.

AIR is cyclical and we have already seen a material reduction in the growth rate of inbound tourism. I think its unwise to completely rule out the possibility of a GFC Mk 2.
I'm of the view that a rerating is unlikely at this stage, (until the drum beats of a trade war reduce to a lot lower intensity) and the shares are presently trading at about fair value.

We might get a small rerating in due course if the market approves of the new chief in command of the rudder controls. Somebody with a proven track record of cost control would appear to be a good choice at this point.

http://www.sharechat.co.nz/article/d...ays-jardenhtml

FWIW I have a 2.5% portfolio allocation to AIR at present with a bias towards moving that up towards 3.5-4.0% in the near term purely for reasons of portfolio yield enhancement with no real expectations of any near term capital gain from such a possible move. Lets see what the annual result looks like.

[RTM]

That's the $64,000 question !


FWIW I have a 2.5% portfolio allocation to AIR at present with a bias towards moving that up towards 3.5-4.0% in the near term purely for reasons of portfolio yield enhancement with no real expectations of any near term capital gain from such a possible move. Lets see what the annual result looks like.

Interesting.
My allocation currently is 3.97 %. Would like to take it higher but I suspect it will re-rate higher, perhaps approaching 5%.
So while I would like to buy more, probably won’t. Maybe I should use Horus’s method and consider my %’s based on cost price. Doesn’t feel right tho.

[Beagle]

Interesting.
My allocation currently is 3.97 %. Would like to take it higher but I suspect it will re-rate higher, perhaps approaching 5%.
So while I would like to buy more, probably won’t. Maybe I should use Horus’s method and consider my %’s based on cost price. Doesn’t feel right tho.

https://www.marketscreener.com/AIR-N...07/financials/
You could be right, average view of analysts is this is the low point of the cycle. I am probably a little bit underweight on where I want to be with this one.

[winner69]

Luxon talks about electric planes


Not a good start in Norway
https://www.reuters.com/article/us-n...-idUSKCN1V423N

[Beagle]

That's "shocking"... you see what I did there

[Beagle]

https://www.nzherald.co.nz/business/...ectid=12257288

Speaking of shocking...I think CAA are in quite a mess and speaking of mess's a senior AIR engineer told me on the weekend the last Airbus they received had a rag left inside one of the fuel containers that had "interesting" consequences.

On the subject of mess's, doubt this Hong Kong situation will end well. Wonder how many AIR flights are going to be affected ?

[traineeinvestor]

On the subject of mess's, doubt this Hong Kong situation will end well. Wonder how many AIR flights are going to be affected ?

Reporting in from ground zero.

It won't help AIR at all. Any gains they make through picking up passengers from the partial boycott of Cathay Pacific (instigated by a number of PRC controlled companies), will, I suspect, be overshadowed by reduced numbers of passengers coming to or transiting through Hong Kong + (possibly) increased discounting as Cathay Pacific tries to keep its planes full. There may also be opportunities to grow routes flying directly into the rest of China as PRC travellers look to skip the usual shopping excursion in HK on their way through to NZ. There's already been a huge drop in tourist numbers and business travel to the SAR (unsurprisingly) and the general held view is that it will be a very long time before those numbers start returning to normal.

Obviously, all this is pretty speculative but at best AIR might do a little better and more likely a little worse.

Disc: not held