Forum Archive Index - February 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi hello,
 
>
>I'm confused. Why wasn't there a strong market reaction to
>the announcement of AIR's positive profit announcement?
>-- 
>hello
>   


The sharemarket reflects the future prospects of a company.  Results 
are old news which are usually built into the shareprice already.

The headline result was probably slightly better than expected but it 
was supported by lower fuel prices than budgeted for (due to the high 
$NZ/$US) exchange rate.  In other words should fuel prices turn 
around the profitability of Air NZ will deteriorate significantly.  
Also the reality of of a war in the gulf might result in a knee jerk 
reduction in overseas travel, even if in the medium term we might see 
more people headed to NZ as a 'safe haven'.  The medium term prospect 
of some alliance with Qantas is a positive as it would in effect mean 
Qantas/AirNZ would move into a crushingly dominant market position.

There is no prospect of a dividend payment from AIR in the medium 
term and indeed the exact opposite, a call on shareholders to put 
more money up, has been signalled.  So there is no reason why a 
potential investor in AIR should jump in any time soon, and this is 
presupposing that Air NZ is cheap.

At a price of 52c, Air NZ is trading at an equivalent pre goverment 
rescue price of around $2.40.  Considering the company still has 
serious debt problems and is so vulnerable to escalations in costs 
and sudden declines in demand I would say this is a very full price.
Also it is now trading at a price way above its asset backing, which 
is almost unheard of for an airline.

You say why wasn't there a strong market reaction to the profit 
announcement.  I would say there was.  Air NZ has been treated 
far better by the market than Qantas, for example, which in financial 
terms is probably the worlds best airline and has announced record 
profitability.   So in summary I can't see anything wroing with the 
market's treatment of the AIR result.  The problem, I think, is that 
you perhaps do not fully appreciate how expensive Air New Zealand is 
at today's prices.  

SNOOPY

disl: ex-shareholder of AIR

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Message posted by Harry Tennyson
 using Pegasus Mail 2.55
I have Word 97 to read attachments
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