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Thread: AIR - Air NZ.

  1. #8551
    ShareTrader Legend Beagle's Avatar
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    Quote Originally Posted by Paper Tiger View Post
    I do not see how you could have arrived at that figure:

    The annual results presentation Slide 21 gives aircraft+associated assets capex of approx:
    $650M + $700M + $570M = $1,920M

    less progress payments of $420 (FS Note 11) = $1,500M

    depreciation for same will be of the order of:
    $380 + $400 + $420 = $1,200M

    a net growth capex (outflow) of $300M.

    They will probably 'borrow' half of that.

    They had total future commitments for aircraft+ of $2,210M (FS Note 22) which are otherwise not on the books.

    Best Wishes
    Paper Tiger
    Agree capex for next 3 years to ostensibly finish the fleet modernisation programme is $1920m less deposits paid of $420m = Net $1,500m

    Depreciation estimates vary considerably in your analysis to mine. My estimate is based on increasing depreciation as the fleet is modernised.
    Depreciation in Fy16 was $465m and in Fy15 $402m so you can see a clear trend up as the fleet replacement programme progresses.

    Keep in mind 3 new dreamliners are scheduled for delivery early in the Fy17 year and these are very weighty capex items.
    My estimates for depreciation are as follows FY17 $500m, (Depreciation is calculated monthly so we have most of the year for the 3 new dreamliners), FY18 $520m and FY19 $540m. Total estimated depreciation $1,560m over the 3 years. (If anything I think the risk to my depreciation numbers are they are a bit on the light side). They will have 9 new Dreamliners in their fleet by about Xmas.

    Yes depreciation will be higher but fuel and maintenance costs will be a lot lower, (especially maintenance as these need no scheduled heavy maintenance for the first nine years)
    These new aircraft position the company very well going forward.

    At 71 cents U.S. I have them at circa negative $50-60m capex for the next 3 years. Capex will be quite a bit less if our dollar keeps its upward momentum.

    After that we're looking at 5-6 years of ~ $500m a year negative capex based on known scheduled deliveries. More special dividends ?

    I trust this explains where we differ in our assumptions.

    RTM - Agreed all those factors are relevant but my position is that the very modest forward PE already fully reflects those risks. Keep in mind the average forward PE for the NZX50 is ~20 so AIR's trading on less than one third of that and around a PE level of half (5.8 last time I crunched the numbers) its ten year average PE 11, (I would debate a normal PE is now 12 given the lowest interest rates in 60 years.
    Last edited by Beagle; 07-09-2016 at 06:38 PM.

  2. #8552
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    Exclamation Ah ah

    Quote Originally Posted by Roger View Post
    ...Depreciation estimates vary considerably in your analysis to mine. My estimate is based on increasing depreciation as the fleet is modernised.
    Depreciation in Fy16 was $465m and in Fy15 $402m so you can see a clear trend up as the fleet replacement programme progresses....
    You are using the wrong deprec numbers. Yours are total for all assets and not just for the aircraft, engines etc.

    Best Wishes
    Paper Tiger
    om mani peme hum

  3. #8553
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    Ah yes.

    Revised aircraft and associated spares depreciation
    2015 actual $324m
    2016 actual $383m
    2017 estimate $419
    2018 estimate $457
    2019 estimate $489

    My revised net capex next 3 years $135m assuming an average exchange rate of ~ 71 cents.

    At 74 cents U.S. net capex would drop to ~ $75m, (note this does not account for the net sales proceeds of the remaining 767's in early 2017).
    Last edited by Beagle; 07-09-2016 at 08:20 PM.

  4. #8554
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    Thumbs up Minor adjustment to the trim

    If you are going to add the spares into the depreciation then need to add spares capex onto the $2.1B spend. Want to split the difference on the net value and call it $220M?

    We both need to add the $420M progress payments already made back because they are not the progress payments included in the future capex figures.

    Stronger NZD good for buying planes and fuel, let us hope it lasts.

    Do not know the precise details for airframe hours and cycles for AIR 767s but ballpark for that age appears to be about US$10M buying price.

    Best Wishes
    Paper Tiger
    om mani peme hum

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    NZX currently has the price at $2.060 - will this be the opening price, or is it likely to change some more before opening?

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    Quote Originally Posted by oldtech View Post
    NZX currently has the price at $2.060 - will this be the opening price, or is it likely to change some more before opening?
    That would probably be the theoretical ex div price based on last nights close. I do not think this is a trade as such and the market will determine this morning where the pricing action goes.

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    Thanks blackcap, will wait and see what happens. Expecting a bit of turbulence ...

  9. #8559
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    Default A slightly different viewpoint on the trim angle / tweaking the rudder angle slightly

    Quote Originally Posted by Paper Tiger View Post
    If you are going to add the spares into the depreciation then need to add spares capex onto the $2.1B spend. Want to split the difference on the net value and call it $220M?

    We both need to add the $420M progress payments already made back because they are not the progress payments included in the future capex figures.

    Stronger NZD good for buying planes and fuel, let us hope it lasts.

    Do not know the precise details for airframe hours and cycles for AIR 767s but ballpark for that age appears to be about US$10M buying price.

    Best Wishes
    Paper Tiger
    Seeing as the company hasn't flagged any obvious additional capex apart from the planes maybe a holistic approach towards deducting total company depreciation isn't entirely inappropriate ?

    Regarding the $420 deposit already made, if its anything like building a boat they want progress payments as the build progresses so I would speculate a large part of that deposit is progress payments on the 3 dreamliners they're getting imminently.

    I started looking closely at capex and gearing post this dividend payment to examine the companies ability to be able to continue to pay 20 cents in dividends across the cycle. I am comfortable from a balance sheet perspective in terms of gearing and capex they can do this. Profitability is a separate matter and while its notoriously variable in the airline industry based on the mid point of this years forecast ($500m) in a year in which the competition is very intense I see EPS of 32 cps. ($500 x .72 / 1123m shares)

    Thanks for your thoughts on average 767 sale price.

    I'd like to think we can find common ground that net capex for the next three years of the fleet replacement cycle is inconsequential in the context of a company with turnover exceeding $5 billion per annum and after FY19 in the words of the CFO Rob McDonald, "we're looking at years of tremendous free cash flow"

    Winner mate you raise a good point the other day about the $150m bonds @ 6.9% being due for repayment in November 2016. I'd expect they'd offer up a new term of 6-7 years at around 4-4.5% saving ~ $4m per annum in interest.

    Another point, we know the little 19 seat planes have ceased operations and C.L. said they were costing the company ~ $1m a month.

    I like the way that management is continually looking for cost savings and efficiencies. We haven't really talked much about how efficient the airline will be from FY19 onwards with one of the most modern fuel efficient fleets in the world at only 6.2 years average age. To coin one of Percy's favourite sayings, it appears we're well positioned
    Last edited by Beagle; 08-09-2016 at 08:00 AM.

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    Quote Originally Posted by Jantar View Post
    It looks like my hope of buying a couple of thousand more tomorrow at $1.92 have gone out the window.


    ....but buying this morning at 205-210 will still be great opportunity to enrich oneself
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

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