Originally Posted by
modandm
Nick Mar (Macquarie) has just put out the best analysis on Air NZ I have ever seen - very fine work, really detailed data (literally route by route) he has got from OAG (subscription database), and more just geeky detailed work. Looking at it in detail I recognize many of his assumptions as similar to my own, although he is conservative in places. I think he hasn't picked up the handling costs of fuel either, but his assumptions work okay with my thinking.
If any of you get the chance do read it.
Anyway he as a $2.45 price target based on 3.5x forward EV/EBITDAR, the historical average (equates about 11x PE - applying virgins losses to earnings).
The issue I would have is that he hasn't added anything for the value of the virgin stake. Last I checked Virgin was worth c.38cps. Even at half that, your looking @$2.64.
The stock has also traded up to 4x EV/EBITDAR regularly which would give $2.85, adding half the virgin stake gives $3.00+
I'm happy to say that I think on medium term assumptions of 80c NZD, and Brent $98bbl, the company is worth somewhere between $2.60 and $2.80. If you paid this sort of price, you could expect a return of around 5-6% pa in dividends and about 8-12% growth in EBITDAR, or EPS (roughly on average over the years FY16 through 2020), offering prospective returns of 13-18%, which I think is what most would require to own the share.
For investors at the current market price, should the stock move towards my valuation range, well thats tasty upside of between 40% and 55%, with a dividend of 7% on top. How many stocks you own with that upside over 1 year?
I'm pretty convinced this is really good analysis, but of course there are uncontrollable factors that may see this not play out.
Now you see why I have so many shares right...