"VBA: Last Traded: $0.33 Market Cap: $270M Sector: Industrials Summary of report dated 11/06/09
VBA: ACCUMULATE / MARKET PERFORM Valuation: $0.78
Oil price and currency revisions CBA Economics has lifted its oil price forecasts (USD terms) for 2009 and 2010. These revisions can be attributed to oil prices increasing faster than anticipated. CBA Economics are sceptical as to whether recent gains in the oil price are justified by oil market fundamentals. In addition, CBA has recently revised lower its USD exchange rate forecasts. CBA Economics forecast continued weakness in the USD given the pressure on the US Government's AAA credit rating. The AUD/USD is forecast to appreciate to 0.90 by September 2010. CBA Economics revised AUD/USD forecasts AUD/USD: 0.85 in FY09, 0.88 in FY10 and 0.79 in FY11.
What does all this mean for QAN and VBA? Oil is a key driver of QAN and VBA’s costs, representing 35% and 30% of 1H09 costs respectively. Both QAN and VBA’s exposure to the cost of oil is managed by its hedging. The changes in CBA’s oil price forecasts are most likely to impact FY10 earnings and beyond. Earnings revisions The revisions in currency forecasts essentially offset the increase in oil price forecasts.
VBA: We have revised our yield forecasts down. EPS has been revised down 6.8%, up 36.2% in FY10 and up 61.8% in FY11.
VBA: Key catalysts for this stock are a turn in demand and success with V Australia. Despite the stock trading at a significant discount to our Valuation of $0.78 (up six cents), we expect the risk of even softer demand to continue to weigh on the stock in the short term. CommSec's recommendation remains ACCUMULATE / MARKET PERFORM."
My take: Slow and steady - VBA is a solid buy at the moment with oil and swine flu having an added impact, combined with the economic crisis. Price is at near lows with a solid resistance @ 0.35c. Am expecting this to jump come Aug/sept - going into the xmas holidays, AUD getting stronger and swine flu ceasing to be a influencing factor on passenger numbers
VBA Price at posting:
27.9¢ Sentiment: Buy Disclosure: Held
