Originally Posted by
Roger
So...after much hand wringing and head scratching about what to do with the funds I trimmed from CVT today I decided to increase my stake in AIR in the lead up to the result.
My instinct aligns with analyst expectations at this stage of net profit after tax of circa $400 for FY17 so EPS of approx. 36 cps and on a theoretical ex divvy price of $2.02, (2.22-0.20) looking through the forthcoming dividend, I'm basing my investment case on a forward PE of 5.6 times earnings. If they can achieve that when a range of new competitors are launching opening specials at our market then I think the company can build a base from here and I think I'm buying on a very realistic PE multiple. Management expect yield pressure to ease off in FY18, or so they said at the investor day briefing some months back. History suggests airlines discount heavily when they start new routes to build business and fill airplanes but launch specials from AIR's competitors don't usually last indefinitely.
From a straight out dividend hound perspective this was an absolute no brainer switch. For every CVT share I trimmed I have forgone a 2 cent final divvy and bought 4.5 shares in AIR x 20 cent expected divvy including the special = 90 cps. Just a "small" difference...45 times the amount of dividend :D...(yes I realise this is a bit cheeky as one is not comparing annual dividends between the two companies excluding special).