AIR - Air NZ.

[winner69]

PE was between 5 and 6 during 2008/2009. (Eps was 21 cents in 2008 at the peak of that cycle)

[winner69]

What I would like to know is....what is the mindset of those who are selling?

Maybe it was that Death Cross on the chart that scared them off?

[Valuegrowth]

There could be different reasons for share prices drop in AIR NZ

• It may by due to personal reasons
• It may be to raise funds to buy another attractive investment
• It may be due to doubt about the airline's ability to make attractive profits over the next two years as economic activity weakens and competition increases.

Only positive news for airlines is lower oil prices. Despite lower oil prices we didn’t see drop in prices of air tickets. The global airline industry is set to face more aggressive competition in the coming year.

Airlines were able to maintain profit mainly by cutting costs thanks to lower oil and other raw materials. We could expect more volatility in this stock in the coming months.

[KiwiGekko]

What I would like to know is....what is the mindset of those who are selling?

I sold my AIR on Friday at the open ($2.53), after watching 2 days (and Friday a 3rd after I sold) of it going slightly higher at the open (I'm guessing retail investors are buying at the open trying to catch the bottom) and closing lower. - Couta probably bought a few of mine... Good luck with them mate. :-)

I believe AIR is a fantastic company and is running as a well oiled machine, but they do face some fairly decent headwinds for FY16 and the market seems to have turned extremely conservative recently.

My reasons for selling (in order of importance) are:

1) The Technicals on this stock are not good. AIR's SP is falling quite quickly against the market trend after a record profit announcement and some very impressive growth figures. The way this is happening is quite unsettling and does not make a whole lot of sense to me and if I don't understand *why* a stock is behaving a way generally speaking that's a good time to get out.
2) I reached my bottom number - I simply want to preserve capital and when things are not so rocky I will come back.
3) AIR face some fairly decent headwinds filling the extra capacity they have coming on with a very uncertain economic climate.
4) There is increased competition and lower oil prices do cause other airlines to enter the market, I am not concerned about the domestic competition, but the international routes is worth acknowledging.
5) Globally confidence levels seem to be down, does this impact levels of travelling / tourism? I don't know, but see #1 - I don't think anyone can predict how this last couple of weeks (months?) of this "correction" are going to play out.
6) I potentially have another use for these funds in the near future.

So I am out, I have taken a small loss on this last trade, but that is life & I am sleeping better for it. I hope its the bottom for the holders and stand ready for when things are looking a bit more positive again & we have a bit more data to show us what is happening in the market. Hopefully that helps explain my reasons for selling, I look forward to a good debate and seeing how the future proves me wrong or right here.

[Beagle]

AIR an interesting high yield story now too. Current year 16 cps fully imputed = 22.22cps gross = just on 9% gross and you get the 9.5 cent final very shortly as a nice bonus on top of that.

AIR were asked by analysts during the call for their dividend policy and CL said they don't have a specific policy per se, its a call they make at each half year juncture so this is pure speculation but if we assume this year's pattern of paying 16 cps out of 29 cps is normal year that represents a dividend pay-out ratio of 55%. Looking at consensus analyst earnings estimates for FY16 and Fy17 and averaging those we get prospective earnings of in total 81cps over the next two years which would speculatively give fully imputed dividends of 44.5 cps, gross dividends of 61.8cps, (44.5 / 0.72) so on average gross dividends of 30.9 cps per year. Based on Fridays close this gives a theoretical ex divvy price of $2.40 so investors buying this for yield could speculate that they'll be looking at annual gross returns of 30.9 cps on their investment of $2.40 or a gross yield of 12.9%. If someone were looking at a geared situation and borrowing at say 4.69% on their mortgage, (I am not suggesting this but this is what people do with rental properties every day of the week), clearly this investment is highly likely to be self funding with plenty of net return.

Suppose one invested an average Auckland house value of $800,000 in AIR shares they might speculatively expect annual gross income of $103,200 from their AIR shares or from the 101 sets of rental property financial statements I've done they might speculatively net, (after expenses, but still taxable) about $15,000 - $20,000 in rent after all expenses...assuming the tenant didn't turn the place into a P Lab and assuming they paid rent all year. (Neither of these assumptions are a given by any means). Of course if you have meaningful debt on said property expect to be putting your hand in your own pocket over and over again to fund the property...unlike the happy AIR shareholder who will be enjoying lucrative positive cash flow returns.

Fundamentally its pretty obvious which investment is better underwritten by the real cash returns being received.

The reason I provide this apparently obscure comparison is you'd be surprised how many times a suburban accountant is asked if investing in a rental property is a good idea. This usually goes something like this, There's nothing safer than bricks and mortar right ?

So...here is my contention... is our dear friend Couta1 crazy in having a XXXXL bet on AIR crazy or are people buying an Auckland rental property after many years of explosive growth already factored into the price and with such relatively pitiful net rental returns the true nutty ones ?...you be the judge !

Anyway back to more relevant comparisons. I believe the prospective yield puts it towards the very top of the NZX yield table and remember that's paying out only 55% of earnings not close to 100% like many of the other comparative high yielding stocks do.

[winner69]

AIR an interesting high yield story now too. Current year 16 cps fully imputed = 22.22cps gross = just on 9% gross and you get the 9.5 cent final very shortly as a nice bonus on top of that.

AIR were asked by analysts during the call for their dividend policy and CL said they don't have a specific policy per se, its a call they make at each half year juncture so this is pure speculation but if we assume this year's pattern of paying 16 cps out of 29 cps is normal year that represents a dividend pay-out ratio of 55%. Looking at consensus analyst earnings estimates for FY16 and Fy17 and averaging those we get prospective warnings of in total 81cps over the next two years which would speculatively give fully imputed dividends of 44.5 cps, gross dividends of 61.8cps, so on average gross dividends of 30.9 cps per year. Based on Fridays close this gives a theoretical ex divvy price of $2.40 so investors buying this for yield could speculate that they'll be looking at annual gross returns of 30.9 cps on their investment of $2.40 or a gross yield of 12.9%.

Suppose one invested an average Auckland house value of $800,000 in AIR shares they might speculatively expect annual gross income of $103,200 from their AIR shares or from the 101 sets of rental property financial statements I've done they might speculatively net, (after expenses, but still taxable) about $15,000 - $20,000 in rent after all expenses...assuming the tenant didn't turn the place into a P Lab and assuming they paid rent all year. (Neither of these assumptions are a given by any means).

Fundamentally its pretty obvious which investment is better underwritten by the real cash returns being received.

The reason I provide this apparently obscure comparison is you'd be surprised how many times a suburban accountant is asked if investing in a rental property is a good idea.

So is our dear friend Couta1 crazy in having a big, big bet on AIR or are people buying an Auckland rental property after many years of explosive growth already factored into the price and with such relatively pitiful net rental returns the real nutty ones...you be the judge !

P labs ....plane crash ...hmmyh

[Beagle]

P labs ....plane crash ...hmmyh

No investment is risk free mate.

[voltage]

Good points Roger. $800000 in AIR gives a lot of specific risk compared to a rental. But the figures speak for themselves. You are expecting a lot of capital gain in the rental to justify the low dividend yield. However, I do like the comparison with AIR. Perhaps a basket of top dividend shares would be the way to go.

[Beagle]

Good points Roger. $800000 in AIR gives a lot of specific risk compared to a rental. But the figures speak for themselves. You are expecting a lot of capital gain in the rental to justify the low dividend yield. However, I do like the comparison with AIR. Perhaps a basket of top dividend shares would be the way to go.

Yes to be clear, its definitely a lower risk approach having a well diversified portfolio...the post was merely for illustrative purposes as I am sure you and others understood.

Well Jetstar are set to announce their 4 regional destinations this morning. I think you will be pleased Iceman...Nelson a shoe-in I would have thought.

[iceman]

Well Jetstar are set to announce their 4 regional destinations this morning. I think you will be pleased Iceman...Nelson a shoe-in I would have thought.

Yes Roger. Nelson, New Plymouth, Napier and Palmie it is, with Nelson getting both Wellington and Auckland flights. I am very pleased with this as I am sure all of Nelson and the other towns/cities are. I suspect I will keep flying mainly AIR, but at much lower fares. Competition was needed with AIR, now we have it. Great news.