My sober assessment of the long term impact on AIR
Quote:
Originally Posted by
Sgt Pepper
Can someone enlighten me? How can the current valuation of $1.20 per share be justified, are investors delusional??. As an article in stuff this morning indicated there is about as "much chance of a return to dividends being delivered as a reunion of the Beatles"
You've got to wonder if the board have their heads in the sand too. http://nzx-prod-s7fsd7f98s.s3-websit...043/317644.pdf
From the interim report "I am confident that we have the ability to manage the expected short-term impacts of Covid-19 effectively".
Declaring an unchanged dividend and then having to cancel it suggests that board have been behind the times with thinking through the impact of Covid 19 from the outset.
Shareholders equity as at 31 December 2019 was $2,014m.
There is no doubt whatsoever in my mind that this time next year they will have incurred losses of at least that amount so the shares are presently technically worthless.
There's also no doubt in my mind as to the fact that the NZ Govt will have to convert their $900m loan to equity contemporaneously with a rights issue of a similar amount to other shareholders which will happen sometime in 2020, probably by at latest Sept 2020, potentially a lot sooner.
A have serious doubts that a ~ $1.8 billion capital raise will see them right through this Covid 19 crisis and believe the risks of a further capital raise to restore liquidity from losses in FY21 and FY22in due course are very real. Indeed, in my mind there are real questions as to whether the company can even break even in FY23. That year starts in July 2022 only 27 months from now. They may be back to 60-70% of capacity by then or perhaps only 50-60% which won't be enough to make a profit.
Really I don't see any real money being made until they are back to 80% load factors on the substantial majority of their former route network. Maybe they have a chance of a small profit in FY24 but I think more likely FY25. In the meantime it won't surprise me to see them burn $4-5 billion in capital over the next few years to stay afloat.
In that context what's the current $2 billion of share equity worth !