Forum Archive Index - December 2000

["G Stolwyk" <stolwyk@wave.co.nz>]

 

 

Hugh,

 

Is debt bad? I am referring to companies where the ratio current assetts : current liabilities can be close to 1.

 

H: It depends on the amount of cash flow being generated and to what use it is put.

AIA tends to have a high operating cash flow; it is about 1.5*E/S.  

 They feel that they can support term borrowings of some $290 mill. As interest is deducted from income prior to taxation, their use of capital is tax efficient.

 

Obviously, the return on the borrowed money is higher than what they are paying in interest which is adequately covered.

 

Being able to use this money speeds up development of land. They own all real estate. Most of it is rented out. Their web site < www.auckland-airport.co.nz >

 

G: I was told that the just completed 'Warehouse' has the highest revenue per transaction!

I think that, given time, AIA's property valuations must rise!  

 

H: The government of Singapore knows AIA better than the NZ citizen. I feel that if they were allowed to take it over now ( I hope not! ), then they would have to pay close to $4.50/share.

 

The shareprice should rise with the rising  flow of tourists. An increasing number are NZders who travel to see their family in Australia and vice versa.

 

Singapore tends to have a long term outlook and deep pockets! 

 

 I think that the current share price should be close to $3.30! 

 

G: I can remember that when AIR NZ had a monopoly, people travelling in this country were made to pay exorbitant fares!

Many say they still do! Now the airline is moaning about the extra fees they have to pay!!

 

H: Air NZ feels hard done by; after all, Qantas hedged their fuel price and they did'nt !  Sour grapes?

 

 Gerry

 

( Being a NZder, I am proud to hold AIA! )