AIR - Air NZ.

[see weed]

Where can I go to listen to the conference call?

[Beagle]

Mid point of the forecast is $500m. If they pay full tax on that, (it's never quite full tax but lets assume it is next year), less 28% ($140m) = $360m / 1,123m shares = 32.06 cps.

Based on yesterday's closing price $2.22 gives a theoretical ex divvy price of ($2.22 - 0.35) = $1.87

1.87 / 0.3206 = PE of 5.83 for FY17 a year in which AIR will be subject to all the effects of increased competition.

Interesting comparison, we have SKL which revised guidance four times last year, has never shown any genuine long term growth over time and currently trades on a forward PE of 13.

But of course of far more relevance is the forward PE of QAN which we can't gauge because they refused to issue guidance but did note increasingly competitive yield pressures.

Sober as a Judge and I can see genuine value here in a market that's widely considered to be trading on very stretched multiples.

Have to agree that taking a very large poorly diversified stake is a very high risk strategy but each to their own and our friend Couta1 will not be eating cold can's of house brand jellymeat anytime in the foreseeable future that's for sure especially not after getting in excess of $120,000 in his next dividend !!!!!!

[Beagle]

Great result today, but still unsure about going forward. Does AIR still have a div reinvestment plan? If so anyone know when they announce the purchase price for that?

No its presently suspended as they have a whopping $1.6 billion in cash at balance date and after balance date on 4 August had another $140 odd million repaid from their shareholder advance to Virgin.
The company is literally swimming in cash hence the special dividend and no need to issue shares under a dividend reinvestment plan but its easy enough to run your own plan and reinvest the dividend buying extra shares which is an extremely good way to boost your future dividend yield. A 14.86% gross return across the cycle, see comment below, would be boosted by 35/222 = 15.77% more shares for those that chose to reinvest thereby generating a future sustainable gross yield of 14.86 x 1.1577 = 17.2% going forward. Of course you'll have contend with the naysayers who think management don't have a clue what they're talking about and something this outrageously good couldn't possibly happen.

Latest Morningstar Recommendation $2.6 Accumulate:

2017 for Air New Zealand Will Be Well Down on 2016’s Peak Cycle Earnings, but It Will Still Be Solid
Air New Zealand reported net profit after tax for fiscal 2016 of NZD 463 million, up 42% on 2015. Underlying NPBT was NZD 806 million, up 70% on 2015. A final fully imputed dividend of NZD 0.10 per share was declared, to total NZD 0.20 for the year, with a surprise fully imputed special dividend of NZD 0.25.

Over the past four years, the firm has focused on improving the customer experience, from aircraft through to improving service and technologies, upgrading lounges, and enhancing its loyalty programme. Its seat capacity management is more flexible, optimising revenue, and every route is profitable. Fleet simplification, focusing on new fuel-efficient technologically advanced aircraft, has led to fuel, operational, and maintenance savings. The company focused on capital management, with pretax ROIC of 22% in 2016. Although 2016 will herald the peak in this cycle, we view the firm as well placed to manage a return to more competitive market conditions, with six new airlines having commenced services to Auckland in the past six months. By 2019, it will complete a six-year NZD 4.8 billion aircraft capital expenditure programme, leading to an average fleet age of less than seven years, with no major spend until the mid-2020s.

Management guided to underlying NPBT of NZD 400 million-NZD 600 million in 2017. We now forecast 2017 underlying NPBT of NZD 532 million, down 34% on 2016, and NZD 419 million in 2018. Gearing ended 2016 at 49%, well within the 45%-55% target. Although we forecast lower operating profits over the next few years, lower capital expenditure should enable the company to pay out a sustainable dividend of AUD 0.20 per year through the cycle. We revise our fair value estimate to NZD 2.60 per share (from NZD 2.80). At the current price of NZD 2.25, the shares are around 15% undervalued. We reaffirm our no-moat and high uncertainty ratings, reflecting the competitive cyclical nature of the airline industry and its sensitivity to external factors.

I think they meant to say N.Z. 20 cps across the cycle, that's the same impression I gathered from the conference call discussions, 20 cents fully imputed = 27.78 cps gross and on a theoretical ex divvy price of $1.87 ($2.22 - 0.35), management strongly implied a sustainable gross dividend yield going forward across the cycle of 14.86%...yeah that's a shockingly unrewarding investment LOL

Where can I go to listen to the conference call?

http://edge.media-server.com/m/p/xc9rxi7z/r/1
There you go mate.

[winner69]

Where can I go to listen to the conference call?

http://edge.media-server.com/m/p/xc9rxi7z/r/1

Pretty boring but if you have an hour go for it

[Beagle]

http://edge.media-server.com/m/p/xc9rxi7z/r/1

Pretty boring but if you have an hour go for it

Its called doing your homework properly, something more people around here should do, (not aimed at you mate)

[see weed]

Thank you all. Will listen to it while doing the house work. I suppose I should spend an hour seen as they are paying me big div.

[percy]

We certainly live in interesting times with AIR.
I would have thought the result would have given us all the answers we were wanting for.
Yet the share price has not made up its mind.?Now that surprises me considering that massive volume that went through yesterday.
The sp was $2.22 at close of trading on Friday night 26/08/2016..
I note this is under ;
the 50 day EMA $2.23
the 100 day EMA $2.32
the 200 day EMA $2.45
the 400 day EMA $2.47.

[Beagle]

And will stay that way for a while seeing as its going to shed a 35 cent divvy shortly. There's been a dichotomy between FA and TA indicators for quite some time now so nothing new there.

What some people seem to struggle to understand is that even if profit halved from FY17 projected $500m before tax AIR would even then only be trading on its 10 year average PE. Its actually pretty basic, the risks are more than compensated by the ultra low forward PE....bizarre that this simple facts seems to be lost on some people who seem to be on something of a personal crusade to point out the risks of airline investment.

Further to post #8163 paragraph 1, some extremely cunning people might even work out what their forthcoming dividend is going to be an reinvest that dividend before it goes ex, thereby getting an even bigger dividend and boosting one's gross sustainable forecast dividend yield beyond 17.2%. Such investors could be said to be extremely cunning dividend hounds

Disc: Currently sitting at 10% of my portfolio, will be reinvesting my forthcoming dividend before AIR goes ex divvy to compound my future expected returns.

[couta1]

The result was fantastic.
The business is very well run.
For any one looking to invest in AIR it a must read.[And a couple of rereads].
The outlook is sober.
Whether it makes a small part of one's portfolio is for each of us to decide.
However it appears to me that being overweight in AIR is very risky.

Getting up in the morning is risky,skiing at high speed is risky, fishing in rough seas is risky,a bit of high speed driving in a high horsepower car is risky, being overweight in Air is risky but i love all of these things and its risk that makes life more meaningful.

[percy]

Getting up in the morning is risky,skiing at high speed is risky, fishing in rough seas is risky,a bit of high speed driving in a high horsepower car is risky, being overweight in Air is risky but i love all of these things and its risk that makes life more meaningful.

What a fantastic reply.
Yes I can understand AIR is an appropriate share for you.
Meets your risk profile exactly.!!..lol.