A recent financial analyst review below...(not from the 'Australian')
The way ahead
Cash from operation for 1H08 was $18.6M, a rise of $3.3M (22%). We are predicting the cash balance to rise to $37M by year end and this is one of the enduring (and under appreciated) strengths of REX. That said, the market is focusing on short term factors, such as pilot shortages, and this has weighed heavily on the share price.
The guidance is for a flat bottom line year and that is prudent, although skewed by a number of unusual costs. In spite of the higher fuel costs and issues surrounding pilot shortages, it is conceivable that backing these items out, REX would have in fact met its original guidance of
10% uplift on last year. Adding to this is the observation that fares have continued to decline (3.6% in 1H08). If we assumed that fares were in fact increased by a mere 3%, it would lift NPAT by 7.3% in a full year (or for each 1% increase in fares, NPAT rises 2.43%). We would
suggest that this metric is not lost on the company and believe there is scope for modest fare increases as a means to improve margins and the overall bottom line.
And while conditions may be challenging due to skill shortages and spike in fuel costs, the impact on other less capitalised players is fatal. Notably, the failure of the largest competitor to Pel-Air in its core two tonne freight market is as significant as the demise of O’Connor
Airlines in the regional passenger market late last year.
The inevitable consolidation of the industry plays directly into a well capitalised and managed company like REX.
Valuation
Our valuation for REX sits at a nudge above $3.00. We use a DCF methodology and a high WACC (due in the main to the penchant for equity in preference to debt and escalation in interest costs with the 10 year bond rate currently at 6.4%). The valuation has been reduced
largely on the back of trimming this year and next year’s’ forecasts, although we maintain our conviction of strong foreword growth beyond this year for the company.
Monketgirl...welcome. I admire your passion. I too feel that the company will weather the strorm (in what capacity that remains to be seen), but nontheless, it does not dissuade me from applying. Hopefully (for my new careers sake they make it through this tough period).
Like any company there are staffing issues and wage issues.
I have been an Intensive Care Paramedic for 10 years, and in that time, my hourly rate has 'shot up' from
$19.20 to
$23.00 per hr
.
I am the highest clinical level in the state, have been trained in operating theatres and perform identical procedures to that of an emergency department doctor. It is not about money for some people. Last financial year I made 65k (after 10 years at the top of the food chain).
The other people on this forum do make some valid points, which I have taken on board.
Ultimately, like I tell any new person to my industry...this is an opinion, you make up your own mind!!