I think he should turn it into a medium to long term trade and watch it go to $3.50 plus before even worrying about what to do
Printable View
Roughly what sort of time frame would med-long term be?
Let me add to the debate. First things first we need to clear up what the actual earnings were for the 2014 year. As some of you know this isn't easy and the International Financial Reporting Standards, (IFRS), aren't in my opinion always the gold standard they purport to be.
Statutory profit after tax was $262m.
The normalised profit after tax you may have heard was a lesser figure due to removal of the fuel and exchange hedging and derivatives gains. That's fine but as far as I'm concerned as they're embarking upon these hedging and derivatives programs on an ongoing basis so this forms part of their actual earnings for the year. Whether they can repeat those gains in 2015 is obviously an open question.
Less obvious is their treatment of what in years gone past would have been considered to be an extraordinary item, (i.e. non-recurring), the $45m they spent on one off redundancies, heavy maintenance operation rationalisation and fleet rationalisation including fleet transition costs Air are moving to streamline their fleet and maintenance operations and these are one-off costs which they took above the line as a simple increase in labour costs.
If we add the net effect of that back $32.4m ($45m less the tax at 28% that they wouldn't be able to claim if this was seen as it should have been in more traditional times as an extraordinary item) we get true operating profit from ongoing operations inclusive of fuel hedging gains of $294.4m after tax or 26.5 cps.
On that basis I think EPS of approx. 30 cps is attainable for 2015, (excl VAH) provided the economy stays in reasonable shape and there's no major new geopolitical issues. VAH is too tough to value and given an uncertain outlook I have discounted any value in this investment at present until proven otherwise.
I accept to some extent we need to consider the trough / peak cycle PE rationale but I'm also aware that Airlines globally are now being viewed as growth stocks and global airline PE's continue to suggest there's significant room for AIR's current PE to expand. Whether it does or not, only time will tell. With all due respect to one or two previous comments, I think some people are seriously underestimating how much PE expansion has occurred around the world in a post GFC environment on the back of some of the lowest government stock rates in living memory. Have a look at some of the other airlines current PE's !!!
I think there's room for the SP to track north towards $3.00 as the 2014/5 year unfolds given reasonable global conditions. Air need to show they can utilise the capacity expansion they're bringing to market, (remember they have capacity expansion of circa 5% per annum planned for several years), and grow their top line consistent with capacity and if load factors stay consistent with 2014 and fuel prices remain stable then shareholders will enjoy excellent rewards as the year unfolds.
Couta, as promised here is my cashflow statement for 2 scenarios:
1. Punter A buys AIR at $2 and holds to the ex-div date.
2. Punter B buys AIR at $2 and Sells at 2.30 on the close before the ex-div. Thus does not receive dividend
Assumptions:
1.Price falls to (2.30-15.5)=2.145 on ex div date
2.Both punters are traders and pay capital gains
3.The tax rate for both punters in 33%
4.The AIR dividend is fully imputed and taxed correctly (which AIR is)
5.No slippage and no interest received on funds(not material)
6.Brokerage rate of 0.3%
7.For tax purposes, the punter is a trader and liable for tax
8. Punter A buys back on the ex-div date
Punter A
Capital Gains (unrealised) 0.1450 Capital Gains Tax -0.0479 Div received 0.1550 Add Tax on Div* 0.0000 Cashflow Position 0.2522
Punter B
Capital Gains (realised and including brokerage of .0129) 0.2871 Capital Gains TAX -0.0947 Div received 0.0000 Add Tax on Div 0.0000 Cashflow Position 0.1924
So in summary, you are better of holding.
*A note from the IRD website:
You only need to tell us about dividend income if the total was greater than $200 and it wasn’t taxed at the correct rate, or if you are liable for child support. All dividends have tax deducted at 33%
Disclaimer: I'm not a tax consultant. I suggest you seek advice and don't rely on my calculations.
There's so many different variables depending if people are traders, declaring their gains or trying to avoid them or investors and much depends on people's personal tax rate.
One thing to be aware of is that the maximum imputation credit a company can attach to a dividend is 28%, (their own company rate) and the other 5% is taken out of the dividend by way of dividend withholding tax and remitted by the company to the IRD and needs to be claimed back in people's tax returns where their personal rate is less than 33%, (<$70,000 personal income).
I suppose I should trot out the well worn line that if people are unsure how to optimise their position they should take professional advice.
Good post.
Agree that PE's have been on the up, but calling airlines growth stocks is a big stretch. Just because some investors are being stupid and overvaluing some airlines (in my opinion), doesn't mean we should with AIR. There is a saying in the investment industry - 'this time its different'. Again and again time proves that its not different.
I maintain that as we move into FY15 and FY16 using an 8x PE multiple is appropriate for AIR, and consistent with the somewhat low valuation NZ investors have traditionally applied to the stock. After years invested, and numerous discussions with management, I have to conclude that some of this discount is warranted, because like it or not its still government owned, and management is not acting 100% to maximize shareholder returns.
Don't worry too much folks - there's still 40% upside on my valuations.. :)
-mod
I think broadly we're on the same page but arrive at a $3.00 price through slightly different methods. Once they prove they can use the capacity expansion I think we're in clover :)
I'll have a chat with management at the AGM to check if the new Dreamliner is performing according to specifications.
I'm just wondering where the additional profit is coming from. People on this thread are predicting 30-35cps profit in the next couple of years but I just don't see it happening.
From memory, much of the additional profit growth came efficiencies rather than actual growth in passenger numbers or revenue. I might be generalising a little though (I could spend an hour going through the annual report to try and back this up but maybe another time).
In the 5 major markets that they serve, there was only growth in two of them. Efficiencies are good but they aren't a sustainable method of growing the business over the long-term, especially for a business like Air NZ that is supposedly running pretty lean already.
5% capacity growth if utilised would be another ~ $250m on the top line. Dreamliners use 20% less fuel, (fuel costs were ~ $1.2b last year), and have heaps of extra cargo capacity. Last year's true EPS ex of extraordinary items was 26.5 cps...join the dots and extrapolate. The key is whether there's demand for the extra capacity they're putting on. I agree there's plenty of work for their sales and marketing team to do.
The Dreamliner isn't really coming on-stream for another 12-18 months with 2 more delivered in FY15 and 3 in FY16. 20% fuel saving is significant but it's only for a small but growing percentage of the fleet (it's unclear what that will mean in fuel savings). 5% capacity is good but as you say it still needs to be filled for AIR to benefit.
Slightly off-topic but I'm starting to consider a possible hit to the economy in the next 12 months because of the significant fall in dairy exports. Air NZ is a low margin, high-capital business that can easily have its profits hit by a small drop in sales. Economic forecasting is hard though!
Anyway, as you say, 30cps might be possible (and isn't a big leap from 26.5cps) but airlines are a very risky business (hence low P/E) and if there are headwinds in this rockstar economy, 30cps could easily turn into 10cps within 12 months no matter how well run the company is.
Economists are still predicting GDP growth and there's the solid growth in tourism that's been forecasted too :)
An answer to your query is in the offing. The invesigative unit of Aljazeera TV is to broadcast its findings about the 787 in a few days.
It wiil be available on Freeview channel 16 on Thurs 11th at 0800 NZ Time. I have set my VCR to record the programme.
The development of the 787 has been troubled and overlong. I will be paying attention in the progemme for any hint as to the operational performance of the aircraft.
A bad choice of aircraft can be devastating for an airline, so this programme may give us a steer towards Cullen Airlines future.
Boop boop de do
Marilyn
http://www.aljazeera.com/investigati...7/default.html
Thanks love but new aircraft types being very late are nothing new and the initial battery problems have already been well publicised as have the initial stress cracking in certain areas that had to be strengthened.
I'll watch but won't be expecting any dramatic new revelations. I was referring to a piece of info, (which at this stage is not verified) that its not quite right up to the mark with fuel savings, (slightly overweight) but there isn't much in it, in terms of expected v actual fuel burn and operational performance. I'll have a chat with management at the AGM and have a talk to my pilot friend as well. (He doesn't want to change to the Dreamliner because he'd have to take a pay cut from the 777). But really, we all know its late, we know most airlines have negotiated a meaningful compensation package regarding this and does it really matter if the CASK savings over a 767-300ER are 18.5%-19% instead of 20%...
Aljazeera won't have any specific information that's of relevance to the long range stretched 787-9 because Air's version is the first of its type in the world...I believe they call that First Mover Advantage :)
Mopped up a few more this afternoon on the weakness created by the divide hounds. It comes in quite handy being a student as the divie is imputed more than the tax I have to pay.
Roger, I wound up with $2.92 for my valuation so quite similar.
Did you factor in the reduced interest income from the special divie?
Hi Okebw
No question the payment of final and special divvy's totalling $172m is material but free cash flow was very strong last year at ~ $730m so I didn't get into trying to second guess any impact on invested income or borrowing costs as a result of the dividends.
As you've astutely noticed, anyone of a tax rate below 28% gains an additional benefit from dividends being fully imputed at that rate. I would have bought more but am right on my 20% limit for any one stock as a percentage of my portfolio. Nice buying :)
Huh? AIR ex div today? The announcement said Friday.
https://www.nzx.com/companies/AIR/announcements/254452
Details of Final and Special Dividends
* Record Date for Final and Special Dividends: 12 September 2014
* Payment Date for Final and Special Dividends: 22 September 2014
Some posts on this AIR thread can be informative....;)
http://i458.photobucket.com/albums/q...oop_1/zzzz.png
lol, er yes, sorry hoop. Clearly demonstrates how much interest I usually take in divs..
In my experience, it takes more than a few months flying to ascertain the efficiency, or lack thereof, of a new type. I don't know if the Dreamliner has even been deployed on a long haul route yet.
Don't worry Jim. People can be offended all they like. It still doesn't make them right....
Back to dreamliners. I hope to get my first ride next month. Can't wait.
So I'm all for the CEO being rewarded for doing a great job and having a long term incentive plan in place.
But did anyone else notice that he's been issued 4,020,826 shares in the last week...?
Unless I'm misreading the announcements somehow.
https://www.nzx.com/companies/AIR/announcements/254941
https://www.nzx.com/companies/AIR/announcements/255102
Bought another parcel at $2.06 didn't look like it was going to go lower then bang the big boys come out to play:eek2:
Havent really been keeping up but with your purchase at 2.06,were you better or worse off buying after the divi--as has been discussed earlier in the week
The programme didn't have any information about the operational performance of the aircraft.
The sequence where the maunfacturer of lithium ion batteries for military aviation put a bullet through one and caused a runaway fire was scary.
Boop boop de do
Marilyn
This is an extra block on top of my main block which I collected the divvy on, wasn't worth selling my main block pre divvy as the price didn't exceed my $2.30 plus figure to make it worthwhile. If it heads back to around $1.90 then those that sold at $2.26 pre divvy would be pretty happy I imagine.
Noodles I forgot to thank you for your effort in working things out the other day so thank you:cool:
Out with the old.
http://tvnz.co.nz/national-news/air-...rement-6078641
And in with the new
http://www.nzherald.co.nz/travel/new...ectid=11320804
Interesting to note the shiny new puppy seems to be making quite an impression.
wasn't expecting the ex-div to fall this far, it's almost tempting to pick up more AIR at this price given it's forecast for 2015. Thoughts?
Good buying opportunity in my opinion. I'm at my maximum comfortable level with this stock and a happy holder.
I love planes, (just in case this isn't obvious already LOL), the stock is very cheap and management are confident of more growth ahead :)
well...I guess that answers my question
White-noise in the scheme of things, just a chance to pick up more cheap. Remember their growth prospects are still fantastic, I would be surprised it it was at $2.25 in 2 months.
Maybe yes and maybe no-but its still interesting in terms of the buying in relation to Dividend theory
As for the growth prospects ,airlines are one of the harder COs to make assumptions on-there are just so many variable factors involved--(price of fuel-will the dream liners live up to expectations?,and if so ,thats a big plane to fill if demand drops off for some other reason) Will they increase landing fees for a plane so big that when 2 land close together it chokes up the airport facilities?
Im personally looking forward to them over the 777s but going big, ups the anti in many ways for the co. and if they cram them full of seats (like they have done with the 777s) i think it could come back to bite them in the long run.
The last man in charge did a good job--will this one be able to step up?
All that aside -It looks like it would be better to have bought on Fri than before the Divi.
According to the well regarded Australian Aviation magazine September issue (available at your local Witcoulls), the new Dreamliner has been on the Sydney route since early August. The manager in charge of flight operations is reported as saying its performing exactly as expected. Passenger feedback on the flight experience has been very positive and the staff are also really enjoying it. There's another one due this month and a further one due before Xmas.
Its a very important matter that this new type is performing right up to its specifications as there's lots of them coming.
Hi folks. Certainly a precipitous fall in the NZD over the last few weeks. Here's hoping for a recovery post the election (and a good election result). With hedging in place at c.83c it would take a further fall down to around 75c before I started cutting estimates, but it has been bad timing given the USD capex coming up. On the other hand the euro has dramatically weakened (A320's and ATR's are Euro).
The next catalyst for the stock is the annual shareholder meeting.
Oil is close to an 8 month low and substantially cheaper than it was 3 months ago. (e.g.Brent is down about $U.S15 a barrel).
I'd be surprised is they weren't almost fully hedged regarding near term capex.
I should add that my pilot friend at AIR tells me that they've got the tarmac turnaround time down to 1 hour from 2 hours, (which is very important). He also tells me its great that AIR specified the 787-9's with Rolls Royce Trent 1000 engines as the other engine variant that some other airlines have chosen have major problems. I'll cut and paste some of his e.mail which explains it better.
They got the better engines I believe. B747-800s and b787s with the GE engines have a major problem with ice crystal icing causing flameouts. So much so that operators with the GE variants are told to avoid ice crystal icing conditions at all costs. Usually ice crystals are at high altitudes above or in the tops of or in the vicinity of thunderstorm type clouds.
They should be popular with pax with the bigger windows, lower cabin altitude and better humidity.
Here is link to a fuller explanation of the engine icing issue Roger was refering to.
http://blogs.crikey.com.au/planetalk...rced-landings/
Boop boop de do
Marilyn
PS. On the other had it was a Trent engine the blew up on the Queer and Nasty Airlines A380 at Singapore.
The A380 engine failure was due to a manufacturing fault (misaligned drilling of an oil-feed stub pipe), not a design error.
The design of the GE engine is different, which allows ice crystal formation (but don't ask me exactly what that design difference is!).
http://m.aljazeera.com/index/20149481032985564
Hope your life insurance is up to date.
Already been well discussed and problems completely rectified. What part of an all new technology plane having initial teething problems is so hard to understand... I'd leap at the chance to fly a Dreamliner compared to an old tech plane and be more than happy to take my wife, children and grandchildren on one.
Crashed through the psychological support at $2 and doesn't appear to have settled yet. Anyone have insight as to why?
The depth appears much much lighter on both sides since the price adjustment from the divie and these swings in prices seem to be coming from relatively light trading. No broker estimates or news that should be impacting it as far as I can see. ASB still has it at $2.20 and Craigs at $2.50
The investor payout 5.5c + 10c triggered sell signals on the ex day...the technical reason why?.. TA seems to show the sell down on the EX day and the low volumes of trade since is due to the previous high prices being pushed into oversold levels partially due I suspect to demand from divy hunters...and now there's lack of trading demand EX DIV to keep the div adjusted price up at those oversold levels ($2.10 ex adjusted)..
Where is fair value? ..TA wise.. if the bull cycle uptrend remains intact AIR should nearly be corrected by now..there is a Primary up trend / EMA200 conjunction around the 195ish area
On the Fundamental side AIR is poorer now due to the investor payouts.....The special Div two-edged sword has been swung....
You are not being observant Couta...
Even with the special divvy AIR paid out less in divvy's (20 cps) than its core EPS last year so although yes, technically AIR will be poorer upon payment on 22 September 2014 than they will be on 21 September (after payment of $172m in divvy's), this came from liquid resources of over $1.2 billion as at 30 June 2014. Recall too that cash flow was $730m last year and if replicated this year amounts to $183m per quarter and with the current quarter nearly over you could easily make the case that all these divvy's have done is pay out the current quarter's cash flow and AIR is in just as great shape as it was as at 30 June 2014 :D
I suspect Couta1's not far off the mark with that comment. Whist it seems XXXXXXXXXL Kim Dotcom made a fool of himself last night it just creates a little bit of uncertainty in some people's minds. I think we're all good for the another term from National and John is the minister of tourism so rational growth policies in this area will continue and we're very well positioned :)
Reuters is showing six analyst opinions.
Buy 2
Outperform 3
Underperform 1
Well putting my philosophical analysis hat on after a tough day's SP action I'm wondering (seeing as the coy's dividend reinvestment scheme is presently inoperative), how many investors will initiate their own reinvestment scheme with their monster divvy cheque ?
He is not the point--the point is national is in bed with America (with all its bad habits)
I dont think to many think this will bring down National--But a wake up call on this matter is not a bad thing.. National needs the reigns pulled in as we have well seen in recent times--Those backhanders for financial gain(minister of justice -give me a break) is one of those American traits we could well do without.
Tend to agree, I find Rogers posts to have been by far the most informative, constructive and meaningful of all on this thread, and long may they continue.... So the XXXXXL swipe comes as a bit of a surprise. A mans size isn't relevant in any way shape or form to this thread, and Skid has a point, National could do with a reality check perhaps.
This day a year ago AIR was 135 which was 8.2 times F13 earnings
Today it is 197 which is 7.6 times F14 earnings
So great returns who held from a year ago - 46% plus 14% in dividends plus any imputation credits
But what must a few including Roger is that the market thinks less of AIR today than a year ago (lower PE)
If the market had just maintained how it felt about AIR (held PE) its shareprice would be 212 today
Maybe modandum was right - the more AIR make the lower the PE
Bit puzzling eh Roger - maybe after ASM it'll all change. But last year the ASM didn't seem to change things.
It was the sell down that boosted the price .... maybe a Greens buyback next year will help
Not sure what E figure you're using mate ?
Based on statutory profit after tax, (includes fuel and currency hedge gains I get $262m / 1112m shares for EPS of 23.56 and a current PE based on today's low closing price of $1.97 of 8.36 so PE has expanded a little. Nice try :) Use the profit figure excluding fuel and derivatives gains and the PE has expanded a little more so your contention and mod's theory don't appear to hold water.
If the Greens talk to me nicely I'll let them have mine at $3.30, (hey they can pay a 10% premium to fair value if they want them) :D
Being lazy, Roger, using a 25.85 cents per share as per Morningstar database which they call normalised
Probably a silly question.. I'd like to go to the AGM being a shareholder.. do i have to RSVP somewhere?
Hi Folks
Looks like this puppy is struggling to inch up ex div, any reason why and does this offer good buying opportunity at current SP level....appreciate your thoughts, esp from Roger :)
Hi sb9,
Good buying opportunity in my opinion. New Dreamliner is going very well, oil is relatively cheap, foreign exchange hedging is in place for the next two 787-9's at circa 83 cents U.S.
I think the current weakness is mainly reflecting political concerns. With Air's near monopoly on domestic routes there may be a little caution in the market as to what a Labour alliance could propose in this area. The market hates uncertainty so until a National lead coalition is confirmed, (which may not be until several days after the election), Air may remain a good buying opportunity.
The special and final dividends are paid out on Monday next week and it wouldn't surprise me if some people choose to reinvest them back into the airline's shares.
We should get operating stat's for August next week and the forthcoming annual meeting on 30 September is another opportunity for the Directors to update shareholders on current year's progress.
Remember the conservatives might leave Winnie out to dry still!
Trying not to unsettle anyone. I think its a given Winston will take all the time he feels is necessary to make a decision that's in the best interests of...you guessed it, Winston :)
I have plenty of AIR on board already so anyone buying today won't get any competition from me.
This might help grow the pie for the intensely competitive trans-tasman market.
Of course there is no mention of what the fee may be dropped by.
----
Departure taxes in Oz under lens
Passanger departure taxes in Australia are being reviewed following a campaign to have the A$55 ($61) charge cut to help stimulate more transtasman travel.
Australia's Immigration and Border Protection Minister Scott Morrison has announced the Australian customs and border agencies would carry out the review of the services - which include charging - and was now seeking written submissions from the travel and tourism industry during the next few months.
He said after the tax office, immigration and border protection was the "biggest tax collector" in the country, gathering about A$3 billion in revenue each year.
Airport and security charges in New Zealand are around $35.
http://www.nzherald.co.nz/business/n...ectid=11327299
^^ Make a grab-a-seat $69 special to Queenstown look mighty appealing, avoiding all those pesky charges not too forget its arguably one of the most beautiful places in the world :)
Doesn't seem like there's any institutional demand for the stock until the election is done and dusted.
Very much so! I was in Canberra and got talking to a guy who was decrying how expensive it was to get to Thredbo for skiing, as opposed to Queenstown. There are definitely some further opportunities in the trans-Tasman market to improve both passenger volumes and overall yields.
Let's hope things pick back up after the election! Good luck to all holders!
smarts drive Air NZ success
http://www.stuff.co.nz/business/indu...Air-NZ-success
National Party had a great win in this election, hopefully AIR will be a very good performer on Monday like all other state controlled companys.
Yes its a real relief that we are not held hostage to potentially several weeks of Winston Peter's holding the whole country to hostage.
AIR got beaten down to $1.91 at the close on what looks like a day when many stocks were subject to index rebalancing in the final 15 minute match process. They traded most of the day at $1.94.
I expect in the unlikely event of an enquiry into regional fares AIR will easily be able to show that increases are justified based on higher airways and landing fees charges.
I'm expecting a good day on Monday and if for some reason it initially languishes at Friday's close then it's HAMMER time:t_up:
Good news for those of us who use the DRP potentially, if the price goes up in the coming week. The DRP price is determined the last 5 days after ex-div
Dividend reinvestment plan is presently suspended as AIR has no need for extra cash but nothing to stop people running their own DRP. $172m total divvy's paid on Monday, 53% of it to the Govt but a considerable $81m of it goes into investors hands...one wonders how much of that will find its way back into buying more AIR shares.
What a bargain
The Funds seem too be loving AIR as well :)
Air NZ selling cabin design business
Air New Zealand is selling its aircraft interior design company Altitude Aerospace Interiors to British company AIM Aviation for an undisclosed sum.
http://www.stuff.co.nz/business/indu...esign-business