by: STEVE CREEDY From: The Australian May 18, 2013 12:00AM
Increase Text Size Decrease Text Size Print
Virgin
Source: The Australian
VIRGIN Australia shares staged a partial comeback yesterday as shareholder Etihad topped up its holding in the airline to just below 10 per cent.
The Australian carrier's shares fell more than 17 per cent on Thursday in the wake of an after-market profit downgrade lodged on Wednesday night. It clawed back some of those losses yesterday to close at 42c, up 4c, on a volume of about nine million shares.
It is understood Etihad bought shares to bring its holding back up to 9.9 per cent, something the Abu Dhabi airline is entitled to do without requiring Foreign Investment Review Board approval. The shareholding was originally at this level but was diluted because of deals involving Skywest Airlines and Singapore Airlines.
Etihad chief executive James Hogan has previously indicated he would like to take Etihad's stake as high as 19.9 per cent, although he needs FIRB approval to do so, and it is believed Etihad has held talks with Virgin Group.
Digital Pass $1 for first 28 Days . . . Virgin Group recently sold part of its stake to Singapore Airlines, and founder Richard Branson has indicated it could be open to selling down further under the right circumstances.
Virgin Australia was unable to comment on the speculation and the Abu Dhabi-based carrier had not filed a statement with the Australian Securities Exchange by close of market, as it is required to do if its shareholding changes by more than 1 per cent.
Virgin's share price fell after it warned on Wednesday that its underlying profit before tax would be below last year's $82.5 million due to a slowing economy.
It still expected its fourth-quarter underlying profit to be positive, but said it had been unable to recover the cost of switching to the Sabre reservations system this year.
The announcement came after Qantas recently warned it was also doing it tough in the current financial half, and Virgin Australia chief executive John Borghetti told a media conference he saw signs of a softening market.
Analysts, who said they were unsurprised by the announcement, cut their earnings estimates but pointed to expectations of an improvement the first half of the next financial year.
The big fall on Thursday was seen as a combination of an overreaction and the limited proportion of shares in play at Virgin.
Cornerstone shareholders Singapore Airlines and Air New Zealand each hold 19.9 per cent of Virgin while Virgin Group retains 13 per cent and Etihad has about 9.9 per cent.
"I think that the issue that Virgin has got, in terms of share price reaction, is a little bit to do with liquidity," said Deutsche Bank analyst Cameron McDonald, who noted this amplified moves in the share price one way or another.
The moves came as Virgin partner Singapore Airlines lifted full-year group net profit 12.8 per cent to $S379m ($309m), although operating profit fell 19.8 per cent.
VAH Price at posting:
41.3¢ Sentiment: LT Buy Disclosure: Held
