Forum Archive Index - December 2002

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

To make the previous post of this thread complete, I add the following:

"It is this near-certainty of this income from NON-aeronautical operations which in turn justifies a higher P/E compared with that from a company which derives all its income from aeronautical operations alone. The latter carries more risk".
--------------------
So now we know why a higher P/E is asked for. As mentioned, last year's revenue from Non-aeronautical activities was 49.8% of all *revenue* while this year it will be approx. 53.6%.

This number as a percentage of profit will be much higher still as the costs are extraordinary low -That shows up in the Operational margin and  NPAT as percentage of revenue margin: see previous post. 

So, in theory the P/E should be higher now than last year's. 

This time there is more borrowing; however, the Credit Rating is the same as before the Reconstruction: good cashflows!

On the other hand more interest needs to be paid so earning rates may slow down somewhat for some time. That in turn may lower the otherwise increasing P/E somewhat. Free cashflow will reduce debt levels over time.

Currrent projection is an E/S of 25 cents. I think it could be 26 cents. If so, then the P/E based on $5.47 is 21.88.

Dividend is normally 80% or 20.8 cents, say 20.5 cents. The imputed div. yield will then be 5.62% for this growth stock.

Gerry
Disclaimer: Outcomes may be different. Readers will buy, hold or sell at their own risk.