Virgin Blue share price

[D Chan]

Originally Posted by Greg McDonald

Virgin Blue shares are going very badly lately. VBA closed today at 0.58...down 4.4% just today and down a massive 18c from mid-March! Thats 23.6% lost value over the last month.
I know other airline shares aren't going brilliantly but VBA seems to be dropping value at a dangerous rate lately. It would be interesting to know what is driving this dive in value.

perhaps investors trying to cash in, one thing is for sure they are not exposed to the chaos in Europe, unlike Qantas. Fortunately for both carriers a strong domestic market and the duopoly means both will remain profitable, which is clearly not the case elsewhere around the world be it Europe, Asia or North America where competition is fierce.

My bet on the shares is that it is inevitable VBA will eventually go back past 1 dollar. QAN probably belongs somewhere between the 3.20 - 4.00 mark.
What's more is that as we emerge out of the GFC into better times things will quickly pick up and earnings will improve.

As for explanations for recent falls - possible reasons include upward pressure on interest rates and trend of crude oil prices (regardless of the hedges)
http://www.aip.com.au/pricing/marketwatch.htm

[Rick K]

There has been a substantial sale of shares by an investment company called Paradice Holdings - some 20 million shares - notified to the ASX on 15th April in a "Notification of ceasing to be a substantial shareholder"
(see http://newsstore.fairfax.com.au/apps...%26submit%3DGo

From what I can gather Paradice Holdings picks up shares that are substantially undervalued (as VBA certainly were) then sells when they have achieved what they deem to be a reasonable (read high) return. They don't hang on to the shares after they reach their target regardless of the true value of the shares.

They may not yet have finished disposing of all their shareholding.

The share price will certainly recover when the Joint Delta Venture comes to fruition.

Rick K

[Anthony T]

Hi there

Notification to the ASX from both DJ & NZ regarding a possible commercial agreement on the Tasman routes.

[Greg McDonald]

Not good:

A LEADING brokerage house has slashed its profit forecast for Virgin Blue as it warns the airline is highly vulnerable to a possible oversupply in the domestic market.

UBS cut its pre-tax profit estimate this week by a third, from $135 million to $90 million, following the airline's own downgrade earlier this month. UBS also trimmed its share price target from 80 cents to 70 cents.

Virgin shares fell 3 to a six-month low of 46.5 cents yesterday.

UBS aviation analysts Simon Mitchell and Ramoun Lazar believe the Brisbane-based carrier should wind back its planned 7 per cent growth plans on short-haul routes to head off a likely fall in demand.

"Virgin is heavily exposed to any oversupply, deriving (about) 60 per cent of revenue from domestic leisure travel," they wrote in a client note.

"Virgin is also facing significant capacity expansions in the order of 20 per cent on some of its more profitable routes, such as the Gold Coast, from Tiger and Jetstar.

"We see current capacity plans in fiscal year 2011 by domestic airlines as too high and believe Virgin's aim of 7 per cent short-haul capacity growth could be scaled back."

While the overall domestic aviation sector is tipped to grow 11 per cent in the next financial year, UBS said Virgin Blue would have to count on a turnaround in the profitability of overseas carrier V Australia as its "main driver of improvement".

UBS expects V Australia to suffer a $40 million loss this year but deliver a $20 million profit in 2011. The analysts also believe Virgin Blue's net profit will improve from

$60 million to $150 million over the same period.

The outlook continues to brighten in 2012, with UBS tipping a $55 million profit for V Australia and a $120 million profit for Virgin Blue and sister operation Pacific Blue.

CommSec found last week the cost of domestic flights hit record lows this month.

John Borghetti, the veteran Qantas executive who replaced Brett Godfrey at the helm of Virgin a few weeks ago, has revealed little about his strategy.

"You'll see us compete more aggressively in segments of the market that make more sense," he said in a recent interview.

[Rick K]

Absolutely time now to buy more shares !!!
Even at only $1.00 in a year this is great capital growth!
I really see V-australia being the biggest contributor to profit by then with the others (VB,PB) also performing well

Rick K

[D Chan]

Originally Posted by Rick K

I really see V-australia being the biggest contributor to profit by then with the others (VB,PB) also performing well

Rick K

are you sure given the transpac route is currently flooded with capacity?

[Rick K]

Transpac will perform much better with Delta JV operating but. as well, from all reports I've seen, Phuket and Fiji (given political stability in both) have been improving take-up rapidly.
Another 777 will add to this greatly.
I've not seen a lot re loads to Jo'burg yet.

[Mike W]

The proposed Trans-Tasman alliance with Air New Zealand won't hurt either.

http://www.smh.com.au/business/virgi...0503-u29s.html

This new partnership could provide DJ with additional pax for intra Australian routes coupling that with cost savings across the ditch.

Upside for NZ as well of course.

[Daniel F]

Originally Posted by Rick K

Absolutely time now to buy more shares !!!

Well I hope you didn't buy any share then... the Virgin Blue share price has plummeted 28% today to $0.31 after announcing a lower profit forecast of $20M to $40M, down from the previous forecast of $80M.

[Greg McDonald]

So it's either a REALLY good time to buy or a REALLY good time to start praying!!

Over 200 million shares have been traded today so far!!! (15:15)