My thinking on fuel and oil prices is that its always a problem ie both short, medium and long term. Especially given that it accounts for 27% of total operating expenditure as reported in the half yearly results. And this view is also shared by most analysts in the market place as it always pops up as a key risk to their valuations. I don't think its a key factor at the moment in VBA's share price. Just remember while 80c was an inter day peak, its highest close was 76.5c on the same day. At the moment we're trading around 70c, I don't think thats a substantial drop in the share price and there was plenty of support in the high 60c. So I don't think "the price is heading down". VBA has 56% of 2hfy10 fuel cost hedged at avergae crude oil price of USD$97/bbl and 38% of FY11 fuel cost hedged at average crude oil price of USD $96/bbl. That seems pretty good to me.
An article in the AFR today talks about oil prices on VBA. An analyst from platypus asset management said "A good portion of higher oil prices is going to be offset by the higher Aussie dollar, so net-net the impact is not going to be that significant for many companies". Macquarie said in the same article that they also think the higher fuel costs will be offset by the stronger currency - specifically talking about airlines.
The next catalyst for VBA will be how much of the government pie will vba receive and we should now this in the next couple of weeks.
There
VBA Price at posting:
70.5¢ Sentiment: Buy Disclosure: Held
