Deutsche getting on the bandwagon - these guys are probably the worst analysts in the business - 12 month Target in their 28 July update was 23c which was then then theoretical ex - price from the SPP which had just been announced. I don't think it traded below 27c and then... well the rest is history. I guess they only missed a chance to more than double their clients money - but hey that's why they get paid the big bucks ;-)!
Deutsche Bank - Equity Research > > Virgin Blue {Ticker: VBA.AX, Closing Price: 0.52, Target Price: > 0.60, Recommendation: Hold} > > * FY10 PBT forecast of $41.0m, new TP of $0.60ps > > VBA has revised its FY10 PBT guidance from break-even to profitable > but avoided quoting a specific number. We think this reflects the > uncertainty in its near term outlook despite VBA acknowledging that it > is currently operating profitably. We have revisited our forecasts, > noted the new guidance as a continued sign of better domestic > conditions in aviation and we now forecast an FY10 PBT of $41.0m (-$1m > old) based on increased passengers, better yield and lower interest > costs. Our new $0.60ps TP ($0.33ps old) reflect these improvements. > HOLD on low TSR. > > * Lack of numerical guidance points to continued near term uncertainty > > We note that while VBA has guided for a profit in FY10 at its AGM, the > lack of a numerical figure articulates that near term operational > challenges still exist. We forecast VBA domestic to deliver an FY10 > PBT of $164.0m, countered by pre-tax losses of - $123.0m from its > international operations (incl domestic NZ). Key drivers for the > domestic performance are a strong 81% load factor and revised FY10 > yield of -1.0%pcp (-1.7%pcp old). > > * V Australia continues to de-risk & 50% of its DCF value included in > TP setting > > VBA's international performance including that of V Australia (based > on company guidance & recent DB Australasian Transport Conference > industry feedback) is likely to remain weak for the foreseeable future > although there are emerging signs of the outlook de-risking. > We value V Australia at circa 13cps FY10 DCF (20cps FY11) and with the > recent launch of the airline plus the progresses thus far in getting > approvals for the strategic alliance with Delta Airlines, we have now > included 50% of our V Australia valuation into our TP for VBA group. > > * Valuation of $0.60ps; Key risks are V Australia execution & yield > recovery > > We value VBA using a combination of reintroduced DCF (13.7% COE) & > peer PE (12.8x FY10) methods. Key risks include: forward bookings & > yield outlook, fuel price, rates & FX changes, global shocks (e.g. > terrorism, pandemic) and V Australia growth execution including V. > Aus-Delta JV regulatory approval (details, p.5).
VBA Price at posting:
53.0¢ Sentiment: LT Buy Disclosure: Held
