Listed transport sector re-rated upwards
August 13th, 2009
The NZSX Transport Index, made up of Air NZ, Mainfreight and Freightways, has had a bruising 12 months courtesy of the worst economic downturn in 30 years. Still, it has been a stand-out sector in the past month, with the index up about 20%, led by a surge in Air NZ shares. Each in its own way has adapted to worsening conditions – the airline has trimmed capacity, keeping pace with dwindling passenger numbers and bumping up its load factor by 2 percentage points in June.
The airline’s shares have surged 36% in the past month, as fuel hedging helps keep a check on its fuel costs. Forsyth Barr says earnings probably plummeted 48% to $112.9m in the year through June. Still the impact of a slump in passenger volumes may already be priced into its stock, which is rated ‘outperform,’ based on the average of seven analysts’ recommendations.
Mainfreight has benefited from its exposure to the Australian market as domestic business has waned. Four analysts currently rate it a ‘buy.’ Freightways raised more equity capital to pay debt and strengthen its balance sheet. Alan Moore, equities manager at Milford Asset Management says stocks like Mainfreight “have got some good characteristics” though it is now “reasonably fully priced.”
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