Sharechat Logo

Daily ShareChat: Air NZ

By Jenny Ruth

Monday 28th March 2011

Text too small?
 Jenny Ruth

Despite Air New Zealand's profit downgrade for the current six months, it should show a strong recovery in the six months ending December as the volatile economic recovery continues and as it benefits from both the Rugby World Cup and its alliance with Virgin Blue, says Geoff Zame, an analyst at Craigs Investment Partners.

The airline doesn't expect to be profitable in the six months ending June due to the impact of the Christchurch and Japanese earthquakes as well as high fuel prices.

Zame has cut his net profit forecast for the year ending June from $136 million to $70 million, factoring in a second-half loss of about $25 million.

He has also cut his 12 month target price for the stock from $1.62 to $1.56, reflecting earnings-per-share revisions.

"We view the fuel price spike as cyclical whilst the balance of probability suggests the earthquakes are of a one-off nature," Zame says.

"We still expect Air New Zealand to benefit from an improving local and global economic backdrop with full-year 2012 earnings and sentiment underpinned by the (volatile) economic recovery, Rugby World Cup, innovative product launches and the Virgin trans-Tasman alliance,” he says.

Key risk include increased fuel prices, New Zealand dollar weakness and a weaker macro backdrop, he says.

Recommendation: Buy.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Air NZ plans to raise stake in Virgin Australia to 25.9 percent after gaining approvals
Air NZ keeps balance sheet plump, holds back on dividends as fleet renewal looms
Air New Zealand plans to close Auckland maintenance facility, cut 180 jobs, union says
Air NZ's Safe Air unit cuts 84 jobs in Blenheim as contracts end
Air NZ agrees to settle cartel case, expects earnings at upper end of guidance
Air NZ lifts stake in Virgin Australia to 23 percent , may creep up to 26 percent
Air NZ backs down on challenge to cargo suit against regulator
Air New Zealand reviews Japan flights as decline in yen makes travel more expensive
Ex-Foodstuffs boss Carter to head up Air NZ board
Air NZ shares jump 5.6 percent as airline flags annual earnings to more than double