Market talk, or market sulk? Or has the Qantas (QAN) disease spread to its rival, Virgin Australia Holdings (VAH)?
Virgin’s shares yesterday joined a host of other companies in hitting multi-year lows on chat from the market about looming weak results on the way.
Virgin shares closed 2¢ lower at 31.5¢ on Wednesday after falling as low as 28¢ earlier in the day.
That compares with a pre-Australia Day price of 37¢, which was only slightly below the 38¢ a share price of the controversial $350 million capital raising late last year that cemented control of the airline between Air NZ, Singapore Airlines and Eithad.
At that 28c low yesterday, Virgin shares had fallen 24% from the pre-Australia Day level – in just under two weeks – and not a price query from the ASX!
The fall yesterday ended up being almost 6% alone, considerably more than the half a per cent fall in the wider market.
VAH 1Y – Virgin Australia shares down on bad result fears
The airline, which has reported rising returns on fares (or yields), has declined to provide any guidance for the first half. It is due to release its interim result later this month.
Only 23% of Virgin’s shares are available in the free float because it is controlled by those three major airlines and the biggest parcel of shares to change hands in recent times was from Virgin Group, which out at 48c a share back in October of last year.
While a number of analysts reckon the airline will earn a profit in the December half year, a couple now suggest there could a susprise loss, or much smaller result thanks to higher operating costs.
CBA, Bell Potter and Merrill Lynch have all issued significant downgrades to their numbers over the last fortnight.
Merrill Lynch analyst Matthew Spence on Tuesday revised his expectation to a $49 million first-half pre-tax loss. He said his forecast for yields had fallen and expectations for operating costs had risen.
Media talk at the start of this week suggested the airline’s results would be worse than expected with a loss due to be announced. The CBA reckons it could be as high as $53 million in a note issued last month.
Rival Qantas, which, has forecast it will report a pre-tax loss of $250 million to $300 million in the December half year, is due to release its results on February 27. Virgin could release its figures after that date, judging by past timings.
The rise in rumours and broking reports on Virgin Australia is not connected with the news that Virgin Atlantic will pull out of the Australia-Hong Kong route because of poor financial returns. Virgin Atlantic is 49% owned by Delta of the US, which in late 2012, bought out Singapore, which in turn owns around 20% of Virgin Australia.
