Brokers have responded positively to Air New Zealand's (AIZ) intention to sell down its stake in Virgin Australia ((VAH)) and retain a marginal holding.
"..Deutsche Bank welcomes the deal, having expected a sell-down was a likely alternative to a complete exit..""
"..Macquarie notes Air NZ will consider its options for the remaining holding and HNA, having recently acquired a 13% stake in Virgin Australia, has expressed an intention to go to 19.99% over time..."
"..Divestment should reduce Air NZ's gearing levels, which at 53.8% in the first half was near the top of its 45-55% target range. Deutsche Bank expects gearing should fall to the lower half of the range..."
"..From an accounting perspective, the broker expects material mark-to-market losses on disposal of the stake, given an estimate of the first half carrying value of NZ$400m. The main near-term risk to Air NZ's stake was a discounted equity raising, with either Air NZ contributing further capital or being diluted..."
"...The broker expects net proceeds of the sale are likely to be returned to shareholders via a special dividend but the timing is difficult to ascertain, although this could occur before the end of August. Net proceeds are expected to be around NZ25c a share. The broker also expects its shareholder loan to Virgin Australia, around $131m, to be re-paid...."
"...UBS calculates fair value for the Air NZ stock at around NZ$2.60 a share, excluding any potential capital return..."
"..Air NZ has the ability to pay a special dividend while Macquarie also estimates a buy-back for the full proceeds would be around 10% accretive to FY17 earnings estimates..."
"..Based on FY16-20 forecasts and FY11-15 actuals, Macquarie estimates an average return on invested capital at around 15%, in line with the airline's long-term aspirations..."
Share buy back or special dividend - who cares its going to send the sp North and the POO is still under pressure - what a perfect tailwind for the next while - $2.60NZD is $2.48AUD only 48c higher than where we are now & if you add the dividends then I can't work out why this isn't taking off yet - I did see some big buys lining up under $2 maybe the sell bots are chasing the sells downward into a waiting mouth....
AIZ Price at posting:
$1.99 Sentiment: Buy Disclosure: Held
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