Air New Zealand ($AIR.NZ) is an international and domestic airline based in New Zealand. $AIR.NZ is trading toward the bottom of their 52-week range. How is this in relation to the intrinsic value of the company’s shares?

Valuecruncher valuation model of $AIR.NZ with interactive assumptions

Valuecruncher produces a valuation of NZ$1.24 for $AIR.NZ. This is a current valuation (an estimate of intrinsic value using a discounted cash flow model) not a target price. This valuation is 34.8% above the current share price of NZ$0.92.

Assumptions

• Revenue: Reuters aggregates seven analysts covering $AIR.NZ and the mean estimates of 2009 and 2010 revenues are NZ$4.8 billion and NZ$5.0 billion respectively. For our analysis we have used NZ$4.7 billion in 2009, NZ$4.85 billion in 2010 and NZ$5.15 billion in 2011.
• Profitability: We have used a flat EBITDA margin of 12.5% to 2011. Reuters has $AIR.NZ‘s EBITD margin at 14.5% last year and an average of 13.0% over the last five-years.
• Capital Expenditure: We have assumed capital expenditures of NZ$325.0 million in 2009 rising to NZ$565.0 million in 2011 then NZ$450.0 million per annum moving forward.
• Discount Rate: 9.5%. The PwC New Zealand cost of capital report has $AIR.NZ at a WACC of 9.1% with the wider NZ market at 9.5%.
• Terminal Growth Rate: 2.0%.

Our analysis incorporates the cash and debt on the $AIR.NZ balance sheet – Valuecruncher calculates a net debt number.

Play with our assumptions – what does your analysis say?

Disclosure: None

Tags: AIR

This entry was posted on Sunday, November 9th, 2008 at 3:44 am and is filed under Air New Zealand, NZX. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.