Hi Firthy,I believe a $1 is a realistic target. Why?1) RBA's Feb...

Hi Firthy,

I believe a $1 is a realistic target. Why?

1) RBA's Feb 2010 statement on MP was positive. RBA said it now expects domestic growth of 3.25% to 3.5% late 2010 to the end of 2012, unemployment is expected to decline over the period to mid December, consumer confidence is expected to remain high etc. This is all positive for VBA given that its leverage to the direction of the economy.

2) Increase in wealth driven by higher house prices, higher share prices and higher disposable income (this includes the drop in interest rates). Again if people feel cashed up their more likely to go on holidays both domestically and internationally (specially given the strength of the AUD)

3) RBA in its Feb board meeting indicates that it will increase interest rates if "economic conditions evolve broadly as expected". This will continue to support the AUD based on the interest rate differential and reduce the cost of travelling o/s. Also, remmeber a higher AUD has a significant impact on VBA's bottom line. Also, when the PIGs sort out their debt issues and investors flood back into risky assets such as the AUD, then watch it fly. Also, when investors work out that China won't fall in a heap because of some tightening of liquidity again markets will bounce and so will our AUD. China can't afford to have growth below 8% for prolong periods of time.

4)VBA said it now expects NPBT and exceptions 2010FY $80m to $110m. This is based on operating conditions in the first half (doesn't mention second half and I think conditions will get even better - see previous comments), decrease in fuel price (if our AUD bounces again, which it will then fuel prices will remain lower in the second half) and recovery yields (QAN has already commented that it expects better yields in the second half). What this means is that NPBT will be at the upper end of the range, if not greater. A number of investors/brokers/FM's based their valuation on the midpoint. Also, analysts will soon be focusing on 2011 numbers. PE 2011E IS 6.5x and 2012E is 4.6x. I don't know about you but combined with my other views and based on these PE's VBA is still pretty attractive.

There's a number of other points but I'm sure I've bored you to tears. VBA will head higher.