AIR - Air NZ.

[workingdad]

Here's a comment that may irritate some or stoke some response.

I have been in the share market for only a few years, I have done well with an average of 16% p/a although this year is not looking as good with pulling all of my money out months ago other than dabbling back in and out with AIR.

I see prices getting pushed up and down by those that have considerable funds at their disposal and they make money doing so, big money changing investment strategy causing share prices to go up and to go down and again with some investors getting the yips and jumping. Someone makes a decision to start selling or buying and hey presto a trend is started, very little to do with fundamentals, classic example AIR sold VAH and what happened to the SP? Nothing really. The prospect of a special of considerable size and no response, since then its been the general market merry go round, at 2.17 we are only just at the pre Brexit fall.

Compare AIR to other airlines and none of them are suffering in a drop of such magnitude and AIR has never (even at over $3) traded at the EPS levels of comparison airlines. The XAL and others are not down to anywhere near the same degree so AIR is trading below a global average, it has the potential large special, it is reasonably well run, it has a domestic market that performs well, immigration is up which means more family members flying in and out of the country (NZ is a multicultural citizen based country), tourism is at record highs. Yes there is some competition, that's the big bad world and this is not the first time they have had competition. OIL is cheap compared to the past as a decent chunk of expenses meaning load factors can decreases as expected to some degree without a significant hit on the bottom line.

I am still learning and I know AIR's SP will do what it will regardless of my little piece of the action but I wonder how many of the same shares in AIR over the last month or two have been in and out of the same hands - I have no issue, I have done this very thing quite a few times with AIR myself but it still surprises me sometimes just how the merry go round works. Talk it up, talk it down, negative comments abound when SP shows weakness.

I am happy to put it out there, maybe I am wrong and AIR turns out to be a dog but we all make our investment decisions based on our own thoughts - well some just follow the others which is of course a factor.

My 2c

[couta1]

I like your 3rd paragraph wd, ain't it the truth, classic example today watching the depth chart(Some big players selling) but fortunately today there are also a lot of buyers lining up so price holding up otherwise I'm sure it would be a lot lower.

[h2so4]

Here's a comment that may irritate some or stoke some response.

I have been in the share market for only a few years, I have done well with an average of 16% p/a although this year is not looking as good with pulling all of my money out months ago other than dabbling back in and out with AIR.

I see prices getting pushed up and down by those that have considerable funds at their disposal and they make money doing so, big money changing investment strategy causing share prices to go up and to go down and again with some investors getting the yips and jumping. Someone makes a decision to start selling or buying and hey presto a trend is started, very little to do with fundamentals, classic example AIR sold VAH and what happened to the SP? Nothing really. The prospect of a special of considerable size and no response, since then its been the general market merry go round, at 2.17 we are only just at the pre Brexit fall.

Compare AIR to other airlines and none of them are suffering in a drop of such magnitude and AIR has never (even at over $3) traded at the EPS levels of comparison airlines. The XAL and others are not down to anywhere near the same degree so AIR is trading below a global average, it has the potential large special, it is reasonably well run, it has a domestic market that performs well, immigration is up which means more family members flying in and out of the country (NZ is a multicultural citizen based country), tourism is at record highs. Yes there is some competition, that's the big bad world and this is not the first time they have had competition. OIL is cheap compared to the past as a decent chunk of expenses meaning load factors can decreases as expected to some degree without a significant hit on the bottom line.

I am still learning and I know AIR's SP will do what it will regardless of my little piece of the action but I wonder how many of the same shares in AIR over the last month or two have been in and out of the same hands - I have no issue, I have done this very thing quite a few times with AIR myself but it still surprises me sometimes just how the merry go round works. Talk it up, talk it down, negative comments abound when SP shows weakness.

I am happy to put it out there, maybe I am wrong and AIR turns out to be a dog but we all make our investment decisions based on our own thoughts - well some just follow the others which is of course a factor.

My 2c

Yep I guess you have a good understanding of how it all works or at least how instos and big funds want it to work.
I agree nothing to do with the fundamentals of AIR no matter how good they look.
That's the way it is so either sit it out and wait for the share price to reflect its fundamentals or sell out and move on.
Do you have a time limit? I have a time limit rule of 18 months . If a share is not reflecting its value by then I will move on.

[traineeinvestor]

FWIW, prices quoted for the AKL-HK route are noticeably lower than a year ago and I am seeing more AIR emails with specials appearing in my spam folder.

[Biscuit]

.... pulling all of my money out months ago other than dabbling back in and out with AIR....

..... AIR is trading below a global average, it has the potential large special, it is reasonably well run, it has a domestic market that performs well, immigration is up which means more family members flying in and out of the country (NZ is a multicultural citizen based country), tourism is at record highs....

Like most of us WD, you think it is a good company with good prospects, paying great dividends and it looks really undervalued.....but.....you are not committing your money because.....? (probably nothing to do with other people manipulating the share price)

[Beagle]

Good post WD. Market hates uncertainty and in AIR's most recent profit update at their so called investor day they wouldn't / couldn't quantify the effect of increased competition in the new environment in which they now operate.
http://www.4-traders.com/AIR-NEW-ZEA...07/financials/

What they did quantify however which surprised me was circa $120m of non repeating currency benefits they're getting this year that won't repeat going forward. It therefore surprises me in this new yield challenged market era of hot competition that analysts have currently estimated net profit before tax for FY17 of $781m which is only a consensus drop of $56m, (less than half the currency non repeating benefit and no account for extra competition) from the average view of net profit before tax of $837m this year. I think there is potential for analyst downgrades, (current average analyst estimate for FY18 is $574m before tax).

I said privately yesterday to an investor that I see profit before tax of $500m - $600m for FY 17 so I'm considerably more bearish on the extra competition than analysts are.

Its interesting however that if we stick with the official FY18 figure of $574m and call that year some sort of average mid cycle year then the stock is on a PE of only 5.5 at that level vs a ten year average of double that at 11 !

I think the market has got a little over cautious of the outlook and agree the stock has been marked down far harder than most but until AIR's management clarify their FY17 outlook (which they probably won't do until the annual meeting in late Sept), uncertainty is the order of the day and for that reason I am cautious at this stage.

I think there is a genuine risk of analyst downgrades for FY17 and FY18 and have already built that into my thinking. I think the stock is eminently investable at the current price, (notwithstanding competition headwinds) but I can't see a catalyst for a rapid rerating back over $2.50.

Disc: Holding a sensible sized allocation for strong fully imputed dividend yield and not expecting rapid SP gains in the short term.

[workingdad]

Like most of us WD, you think it is a good company with good prospects, paying great dividends and it looks really undervalued.....but.....you are not committing your money because.....? (probably nothing to do with other people manipulating the share price)

No, I have a reasonable holding in AIR, 15% of total 'cash' I had invested before deciding to sell up thinking a correction of some magnitude is coming including doing quite well with AIR selling out high 2.80s when they announced the green vehicle thing. Still think the global economic situation that is the new 'norm' is not a pretty picture reliant on central banks throwing printed money at it.

I hadn't intended holding on to AIR but after coming in too early on the way down a couple of times and recouping some of that with same day trades a number of times I figured I might as well leave it sitting there earning more than the bank is. Last lots bought were at 2.035 and 2.11 after missing out on some at 2.065 on one of the close of market sell offs. Average is more than I want to say but I did say it a few pages back Its not as high as some but I am in the red which I anticipate to be back in the green with EOY divvy.

[workingdad]

Good post WD. Market hates uncertainty and in AIR's most recent profit update at their so called investor day they wouldn't / couldn't quantify the effect of increased competition in the new environment in which they now operate.
http://www.4-traders.com/AIR-NEW-ZEA...07/financials/

What they did quantify however which surprised me was circa $120m of non repeating currency benefits they're getting this year that won't repeat going forward. It therefore surprises me in this new yield challenged market era of hot competition that analysts have currently estimated net profit before tax for FY17 of $781m which is only a consensus drop of $56m, (less than half the currency non repeating benefit and no account for extra competition) from the average view of net profit before tax of $837m this year. I think there is potential for analyst downgrades, (current average analyst estimate for FY18 is $574m before tax).

I said privately yesterday to an investor that I see profit before tax of $500m - $600m for FY 17 so I'm considerably more bearish on the extra competition than analysts are.

Its interesting however that if we stick with the official FY18 figure of $574m and call that year some sort of average mid cycle year then the stock is on a PE of only 5.5 at that level vs a ten year average of double that at 11 !

I think the market has got a little over cautious of the outlook and agree the stock has been marked down far harder than most but until AIR's management clarify their FY17 outlook (which they probably won't do until the annual meeting in late Sept), uncertainty is the order of the day and for that reason I am cautious at this stage.

I think there is a genuine risk of analyst downgrades for FY17 and FY18 and have already built that into my thinking. I think the stock is eminently investable at the current price, (notwithstanding competition headwinds) but I can't see a catalyst for a rapid rerating back over $2.50.

Disc: Holding a sensible sized allocation for strong fully imputed dividend yield and not expecting rapid SP gains in the short term.

Thanks Roger and well considered post with a balanced view. I agree with your values but think the FY17 is a bit cautious - overestimated by those analysts perhaps but it will come down to the impact of the competition and how much of it is offset with cheaper fuel now the hedging is really kicking in and increasing demand. I am going with somewhere in the middle but the dollar will play a role as well.

I have learnt a lot from many of those more experienced on here and enjoy the forum for the most part.

Cheers

[workingdad]

I like your 3rd paragraph wd, ain't it the truth, classic example today watching the depth chart(Some big players selling) but fortunately today there are also a lot of buyers lining up so price holding up otherwise I'm sure it would be a lot lower.

Thanks Couta1, enjoyed many of your posts and its been a ride the whole AIR experience.

It sat around that 2.16-7 mark for a while recently as well, seems a happy trading zone. Its easy to speculate on who's selling and why without the benefit of SSH notices but I am tempted to get more, not just yet but not far off taking another nibble.

[Biscuit]

Still think the global economic situation that is the new 'norm' is not a pretty picture reliant on central banks throwing printed money at it.

You did well to trade your way back towards the green. I don't know what to make of the "new norm". I've parked a growing chunk of money at the bank and the on call portion is earning less than one percent pa. I guess that is a dilemma for many.