AIR - Air NZ.

[Raz]

http://www.stuff.co.nz/travel/news/7...ume-on-tourism

Interesting, shows some barrier to growth and what they are trying to do.

[K1W1G0LD]

Spoken like a true Chorus surviver and good advice to boot, all the technicals may say oversold but don't expect any quick rises from the ashes this time, she's going to be a more arduous process requiring patience and a very long ride on the rollercoaster.

But Still, seems like a good old Warren Buffet style opportunity coming up here.

[winner69]

The CFO seems to be the biggest 'culprit' in hocking off his shares - nearly $3 million worth in recent times

The 'furore' over management selling shares is more about the (outrageous?) remuneration policy that AIR has than anything else.

Oh well, if shareholders dont mind paying these guys that much they also need to understand these guys need to monetize their pay somehow.

[macduffy]

But Still, seems like a good old Warren Buffet style opportunity coming up here.

Tongue firmly in cheek, presumably. I think we know WB's views on airline stocks!

AIR's still a great trading stock, IMO, but not for the bottom drawer.

[TheHunter]

I'm still baffled by this.

QAN although has taken a tumble is trading at a 2016 P/E just below 6, S&P 500 airlines index trade at a forward P/E of around 7.5.... AIR is trading at a P/E of around 4.5...

Sure, QAN has signaled softened demand & oil prices have risen... but relative to prior years, tourism is high & oil is still relatively cheap.

Is it just the market's expectation of these macro economic drivers to continue to get worse? Or is there something else driving this?

My apologies if these all seem blatantly obvious, still getting my head around airline stocks! The sell off just seems overdone IMO on the face of it all.

[Beagle]

I'm still baffled by this.
QAN although has taken a tumble is trading at a 2016 P/E just below 6, S&P 500 airlines index trade at a forward P/E of around 7.5.... AIR is trading at a P/E of around 4.5...

Sure, QAN has signaled softened demand & oil prices have risen... but relative to prior years, tourism is high & oil is still relatively cheap.

Is it just the market's expectation of these macro economic drivers to continue to get worse? Or is there something else driving this?

My apologies if these all seem blatantly obvious, still getting my head around airline stocks! The sell off just seems overdone IMO on the face of it all.

You're not the only one. Tourism is still growing strongly, circa 10%, migration is at yet another all time annual high to the year to 31 March, the latest operating stat's to March 31 looked fine, loads are still running at 84.5% YTD, the highest they've been in years, yields are still very good in the context of low oil prices and QAN announced a slight pullback in expansion for Q4 Fy16 but is still planning on fleet expansion of 6-7% next year in line with demand growth. Tourism growth to Australia was running at 8% per annum last time I checked.

But wait there's more. At the end of January 2016 AIR management locked in forward cover for the maximum allowable amount within their policy guidelines, this when oil was $30 barrel.

From a technical perspective things look truly shocking, in fact if we dip and stay below $2.40 next week it would appear the next support level is somewhere around $2.

From a fundamental perspective AIR has never traded on such compelling fundamentals to the best of my knowledge in its 76 year history, yes 76 years old today.

But that's not all. Our dollar has been rising since last balance date and if its somewhere around U.S.70 cents gearing will be lower, offshore financing and operating leases are converted at balance date at the spot rate and capex this year will also be lower in $N.Z.

SP dropped 32 cents in one week on no new news, go figure but here's my 2 cents worth. The market absolutely hates uncertainty and I guess this is as good an example as you'll ever see.
1. QAN's announcement appears to have been somewhat misinterpreted by the market and the massive downdraft in QAN's stock has rubbed off on AIR.
2. Secondly, the market hates the uncertainty surrounding AIR's VAH stake and wants the deal done yesterday. This surely isn't practical with regulatory consents and all required.
3. Once downward momentum started and technical support level's were broken fear started to grip shareholders, fear that was exacerbated by senior executives selling their shares.

In my view the fall looks overdone but there's plenty of negative sentiment at the moment so when it might recover is anyone's guess but in my view it would take a catalyst and that could well be the successful sell down of the VAH stake.

Based on closing prices on Friday and based on consensus analyst forecasts for FY16
AIR PE FY 16 4.35
QAN PE FY16 5.71

We all know there's more competition coming and such is the case for all airlines...why AIR's forward PE is so much lower than other airlines when AIR's performing so well, that's the real mystery.

[sb9]

SP dropped 32 cents in one week on no new news.

Hmmm...I'm sure those in the broker community have some news amongst themselves, all we retail investors know is of senior execs selling.

[Beagle]

Hmmm...I'm sure those in the broker community have some news amongst themselves, all we retail investors know is of senior execs selling.

I hear what you are saying. First N.Z. investment banking team are tasked in N.Z. with assisting AIR with their review of VAH. Supposed to be internal Chinese wall between investment banking division and the rest of the firm and between that firm and other brokers. I'm feeling the need for another Tui...

[TheHunter]

Appreciate your response Roger, greatly informative as always.

Screaming for a top up... unless there is some information not yet publicly available that says otherwise...

I'm unsure how much value TA really adds here in terms of medium/long term holding, I personally think of it on the basis of the random walk theory... Oh well, if logic always prevailed there would be less opportunity for arbitrage

[skid]

You're not the only one. Tourism is still growing strongly, circa 10%, migration is at yet another all time annual high to the year to 31 March, the latest operating stat's to March 31 looked fine, loads are still running at 84.5% YTD, the highest they've been in years, yields are still very good in the context of low oil prices and QAN announced a slight pullback in expansion for Q4 Fy16 but is still planning on fleet expansion of 6-7% next year in line with demand growth. Tourism growth to Australia was running at 8% per annum last time I checked.

But wait there's more. At the end of January 2016 AIR management locked in forward cover for the maximum allowable amount within their policy guidelines, this when oil was $30 barrel.

From a technical perspective things look truly shocking, in fact if we dip and stay below $2.40 next week it would appear the next support level is somewhere around $2.

From a fundamental perspective AIR has never traded on such compelling fundamentals to the best of my knowledge in its 76 year history, yes 76 years old today.

But that's not all. Our dollar has been rising since last balance date and if its somewhere around U.S.70 cents gearing will be lower, offshore financing and operating leases are converted at balance date at the spot rate and capex this year will also be lower in $N.Z.

SP dropped 32 cents in one week on no new news, go figure but here's my 2 cents worth. The market absolutely hates uncertainty and I guess this is as good an example as you'll ever see.
1. QAN's announcement appears to have been somewhat misinterpreted by the market and the massive downdraft in QAN's stock has rubbed off on AIR.
2. Secondly, the market hates the uncertainty surrounding AIR's VAH stake and wants the deal done yesterday. This surely isn't practical with regulatory consents and all required.
3. Once downward momentum started and technical support level's were broken fear started to grip shareholders, fear that was exacerbated by senior executives selling their shares.

In my view the fall looks overdone but there's plenty of negative sentiment at the moment so when it might recover is anyone's guess but in my view it would take a catalyst and that could well be the successful sell down of the VAH stake.

Based on closing prices on Friday and based on consensus analyst forecasts for FY16
AIR PE FY 16 4.35
QAN PE FY16 5.71

We all know there's more competition coming and such is the case for all airlines...why AIR's forward PE is so much lower than other airlines when AIR's performing so well, that's the real mystery.

I would have thought a rising $Kiwi would hurt,more than help,making ticket prices even more expensive to foreigners or less profit for AIR(in the lower foreign currency) It normally hurts company's of a country with a high dollar.

I agree with the former poster that big management selling was a disaster for the SP and should have been handled in a much better way. The company should have rules in place that insure that the company comes first. Aside from the SP it has created a chink in the Armour of the notion that management are top of the line. (whether its deserved or not)
Now we are torn between two thoughts.... that the SP is ridiculously cheap compared to what we have gotten used to ..and..that there is some disaster around the corner