Okay I'll have a little nibble at that. People keep saying its a cyclical stock and history suggests it is BUT how is it that for about a year now its been well known that Dairy prices were going to come under severe pressure and they did getting to their lowest level in about 10 year's early in winter. This caused consumer and business confidence to hit multi year low's, just this week we had the NZIER saying business confidence was at a four year low and earlier in the month we had another survey saying consumer confidence was at a multi year low. This week we also has the IMF warning we are on the brink of a world-wide recession and consumer and business sentiment has been poor for the vast majority of 2015. Somehow the brokers consider all of the above to be the peak of the cycle and yet throughout all this time aircraft loadings have been very strong at circa 83% all year and most of last year. I have been saying for quite a while now that with low oil and 83% aircraft loads the cash register at AIR is ringing like crazy and now we have confirmation of this from the company this week.
Against this backdrop of low confidence both here and amongst almost all of our trading partners people are still spending money with AIR to such an extent that it is quite plausible that they will get close to doubling last year's profit, itself an all time record !
How does one explain this strong demand in such sustained soft economic conditions ? Have we seen a shift to a point where people think nothing of taking a flight to Queenstown or Australia seeing as often it costs little more than filling up the gas tank of a decent sized car ? In real inflation adjusted terms is Air travel now so relatively cheap demand becomes almost completely inelastic irrespective of economic conditions other than perhaps another GFC ?, (this assumes one thinks we're out of the first GFC).
Each day I get the daily deals on www.grabaseat.co.nz. Today's one that tempted me was $49 Auckland to Nelson...you can hardly buy a decent dinner and drinks for that. Maybe 99% of their customers don't care what the GDT auction price is or that the China economy is soft or that Greece can't pay its bills or that Putin is a ........ or insert whatever other N.Z. or global worry you care to mention. T.C and I had a little chat about the cash flow of the company after the meeting. Everyone knows they have $2.6b for new aircraft capex over the next 4 years, not everyone knows this will be an absolute doddle of a walk in the park for them and their will be cash to burn if oil stays at a moderate level... (read special dividend(s), share buy-backs or both).
$1.1 billion in cash flow last year. Nearly $1 a share. Wonder what this year's cash flow will be ?
Nice analysis Banter. Virgin is forecast to be profitable in FY16 and more so in FY17
thestg Welcome to the forum and welcome aboard as a shareholder. Dividends will easily cover your interest payments so I think you're well positioned.
Roger-
I dont think economic conditions have gotten anywhere near the point where people start cancelling vacations ,despite what economists say about dairy prices etc.
After all ,the outside markets were soaring until a short while ago.
If things do blow then ''you aint seen nothin yet'' but with the nature of an airline (with advance bookings')'it would take a while to hit the numbers.
I think there would be time for those who were not in it at all costs to exit-
I dont think using the last year as a worst case scenario is realistic--the jury is still out on big picture.
Dairy and other local commodities could skyrocket but if the economy in general takes a dive it would affect AIR. (Globalization surely must affect airlines more than average)
Those $49 flights would maybe continue,but the real long haul money makers would take a hit (a vacation abroad is far more expensive than just the air tickets)--Its the full package that would become to much.
Lack of consumer confidence doesnt mean you dont have the money to travel(how many average Joes even think about that stuff) It means you are concerned that it may lead to a situation where thats the case.
If that happened ,there would most likely be more specials--which would suit me though
Pricing comes into the mix.
I am flying ChCh to Auckland return on 16th Feb next year for $48 for a day's book buying.
I looked to travel to Auckland on 11th November for the AWK agm,but it was going to be over $150 return,so I am not bothering.
As an aside, I wish companies would give longer notice of when their meetings will be,so I can arrange cheap flights.
Trailing stop losses based on ATR would have locked in good gains in all those instances. Short to medium traders keen on the stock would have had had several re entry levels as well.
If dividend adjusted prices exaggerate the falls isn't there a danger in using them -see Hoops comments earlier
I haven't backtested trading with close stops on AIR. Seems you have, and 2ATR would have made money over the past two years, in AIR. Hope that continues.
My guess is a 2ATR fall has happened every month or two on average.
I'd use dividend adjusted prices for calculating ATR - otherwise there will be a spurious fall in price and increase in ATR when a share goes ex.
The ATR measured in cents is not affected by adjusting share prices for dividends. It's rendered inaccurate if no adjustment is made.
The share price percent fall and ATR % ARE affected but only (IMO) for old data - because the dividend adjustments add up.
Note though that the percent fall and ATR% are BOTH artificially raised for old data when using corrected prices. I suspect the fall-measured-in ATRs is still exaggerated.
BUT - if you're talking about a looming or just-gone dividend, then IMO it is legitimate (and preferable) to consider, for example, a $3 share cum a 20c fully imputed dividend as being a $2.80 share, when calculating percentage falls.
I understand what Hoop is saying but think that the price adjustments cause by dividends and splits should be adjusted-for, and accurately.
Otherwise there will be spurious sell signals.
I don't trust Yahoo's data; also, they fail to adjust properly for dividends that lack imputation credits. NZ50 index has the same (IMO faulty) approach.
Bottom line for me is use adjusted prices, do the adjustment manually and take 28% off any non-imputed dividend adjustments.
It would be interesting to study how demand held up during the GFC. I might have a good look through some old annual reports to have a look at this next week.
Was some drop in passenger numbers during GFC ....and wasn't 2011 the fiscal cliff thing
But no GFC looming is there?
NZ economy bubbling along nicely
AIR will do fine ..... they screwing passengers more and more and even if numbers fall off a bit making enough out of those still flying to make heaps ... even more than last year
Last edited by winner69; 11-10-2015 at 12:02 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Trust No One - Especially Tigers Asking Trick Questions
Originally Posted by banter
...I don't trust Yahoo's data; also, they fail to adjust properly for dividends that lack imputation credits. NZ50 index has the same (IMO faulty) approach.
Bottom line for me is use adjusted prices, do the adjustment manually and take 28% off any non-imputed dividend adjustments.
I hope that you are not simply subtracting the dividend amount from prior share prices, consider the $1 share that has paid out more than a $1 of historical dividends.
Adjusting for the lack of imputation credits is incorrect.
A 5cps dividend costs the company 5cps per share independent of whether it all goes to the shareholder directly or is split between the shareholder and the tax man.
[Tricky / Trick Questions follow]
But how do you account for the discount on Dividend Re-Investment Plans?
and
how do you account for the supplementary dividend paid to overseas shareholders?
Passenger numbers broken down long and short haul. Short haul is NZ, Trans-Tasman and Pacific.
Done for Roger to see what happened during GFC
But couldn't help noticing that long haul numbers are much the same as they were 5 years ago and less than 2007. Perception (hype) does not equal reality.
Filling in time watching Bathhurst - which is pretty boring really but quite a few kiwi fans flew AIR to go over for the weekend
Last edited by winner69; 11-10-2015 at 04:24 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
Very interesting numbers. Do we have revenue numbers available for domestic / international spilt we can add to this?
Somewhere amongst the numbers - leave that to Roger
Interesting look at those Fact Sheets.
One thing I noticed that yields in 2015 (both short and long haul) much the same as a few years ago (perception doesn't equal reality). Need to do my own research.
But as long as everybody thinks things are honky dory and booming then the share price will head to 3 bucks and then 4 bucks - that's all that matters
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
I understand what Hoop is saying but think that the price adjustments cause by dividends and splits should be adjusted-for, and accurately.
Otherwise there will be spurious sell signals.
I don't trust Yahoo's data; also, they fail to adjust properly for dividends that lack imputation credits. NZ50 index has the same (IMO faulty) approach.
Bottom line for me is use adjusted prices, do the adjustment manually and take 28% off any non-imputed dividend adjustments.[/QUOTE]
I think your post raises some interesting points.NZ50 is a gross index, so it is hard to compare large dividend paying shares such as AIR,HNZ and PGW which are not adjusted for dividends..Well I don't know of any source that adjusts for divividends.So using charts comparing a share that pays no dividend, to one that pays a big dividend is a waste of time.
So do we go back two or three years and add the dividends to the sp to get a more meaningful chart?
Then are EMA's more meaningful.?
Originally Posted by Roger
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