Rex owners up Virgin stake
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Rex owners up Virgin stake
Didn't see that coming!
Rex Airlines owners up Virgin Blue stake; Michael West
The Singaporeans behind regional aviator Rex Airlines have quietly bought a strategic stake in Virgin Blue. They are lurking beneath the 5% disclosure threshold and had no comment when contacted by BusinessDay.
Entities associated with Rex have soaked up around 3% of the carrier. Whether Kim Hai Lim and Thian Soo Lee can get their hands on the readies to make a full bid is an issue in itself. Rex's market cap is only $120 million and though its management runs a tight ship - costs are low and government lobbying high - a scrip bid would have little chance of getting off the ground.
The move to soak up a few shares in Virgin is more likely strategic than a prelude to a bid although Virgin's bombed out share price and cash reserves could present a tasty asset strip.
At balance date Virgin had $604 million in cash. It looks cheap versus its current market cap of $360 million - and the reason is cash burn.
Thanks to a raging fuel price in the last half Virgin put its "average days cash reserves at 101" in its annual report.
Jet fuel costs have since fallen though, along with the diving oil price, and now the formidable challenge is the economy. People just don't fly as much in a downturn and recent traffic figures suggest the malaise is starting to bite.
The Virgin stock price - already under pressure from the economy and a "half-pregnant" strategy of venturing out of straight discount airline territory into international and business segments - was decimated by a barrage of selling when Toll Holdings flogged its 63% stake in the carrier to Toll shareholders via an in specie distribution in August.
The three options for the Rex shareholders would be: one, get some cash from somewhere and launch a bid then merge the two operations; two, buy cheaply and make a turn on the investment and, three, pull off a bid, strip out the cash and wind up the jet leases and other assets to make a profit.
Operationally, there is not so much in the way of synergies as a lack of overlap. It could work. Rex flies small regional routes and its fleet of turbo-prop SAABs would fit with Virgin's Embraers (a decent Brazilian jet) and its 737s.
Funding would be the issue. Via its investment arm, Temasek, the Singapore Government already owns Singapore Airlines and has a stake in discount carrier Tiger. It would not covet Virgin so Temasek is unlikely to get involved.
Rex Airlines owners up Virgin Blue stake; Michael West
The Singaporeans behind regional aviator Rex Airlines have quietly bought a strategic stake in Virgin Blue. They are lurking beneath the 5% disclosure threshold and had no comment when contacted by BusinessDay.
Entities associated with Rex have soaked up around 3% of the carrier. Whether Kim Hai Lim and Thian Soo Lee can get their hands on the readies to make a full bid is an issue in itself. Rex's market cap is only $120 million and though its management runs a tight ship - costs are low and government lobbying high - a scrip bid would have little chance of getting off the ground.
The move to soak up a few shares in Virgin is more likely strategic than a prelude to a bid although Virgin's bombed out share price and cash reserves could present a tasty asset strip.
At balance date Virgin had $604 million in cash. It looks cheap versus its current market cap of $360 million - and the reason is cash burn.
Thanks to a raging fuel price in the last half Virgin put its "average days cash reserves at 101" in its annual report.
Jet fuel costs have since fallen though, along with the diving oil price, and now the formidable challenge is the economy. People just don't fly as much in a downturn and recent traffic figures suggest the malaise is starting to bite.
The Virgin stock price - already under pressure from the economy and a "half-pregnant" strategy of venturing out of straight discount airline territory into international and business segments - was decimated by a barrage of selling when Toll Holdings flogged its 63% stake in the carrier to Toll shareholders via an in specie distribution in August.
The three options for the Rex shareholders would be: one, get some cash from somewhere and launch a bid then merge the two operations; two, buy cheaply and make a turn on the investment and, three, pull off a bid, strip out the cash and wind up the jet leases and other assets to make a profit.
Operationally, there is not so much in the way of synergies as a lack of overlap. It could work. Rex flies small regional routes and its fleet of turbo-prop SAABs would fit with Virgin's Embraers (a decent Brazilian jet) and its 737s.
Funding would be the issue. Via its investment arm, Temasek, the Singapore Government already owns Singapore Airlines and has a stake in discount carrier Tiger. It would not covet Virgin so Temasek is unlikely to get involved.
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In early morning trading VB are up 15%
REX shareholders havn't got a majority foothold yet... as there are no documents lodged with ASIC yet saying that they own more than 5%
Not to say ASIC havn't uploaded it though.
REX shareholders havn't got a majority foothold yet... as there are no documents lodged with ASIC yet saying that they own more than 5%
Not to say ASIC havn't uploaded it though.
Last edited by Skystar320; 3rd Nov 2008 at 03:13. Reason: To please the grumpy old lowerlobe
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REX shareholders havn't got a majority foothold yet as there are no documents lodged when you own more than 5%
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Couldn't think of anything worse. Its fear by the singaporean. VB are having some tough times yes but once they get thru this its time for the regional killer to do its job.
It's interesting to see that just rumors of rex buying out VB has started to push the price up...
Rex also has just purchased 4 more of their saabs outright (with cash) as well as continuing to buy back company shares, easy to see which company is in a good financial position.
Rex also has just purchased 4 more of their saabs outright (with cash) as well as continuing to buy back company shares, easy to see which company is in a good financial position.
Not really Skystar heres what Warren Buffett said about Airlines:
if a capitalist had been present at Kittyhawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money.
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Skystar320...
Kangaroo Court is right that we are lucky to have people dumb enough to invest because if there was no investment the airlines would be in a mess....and that means jobs
But Skystar...you can address the stock exchange tomorro and be on CNN and let them know what a sterling investment the airlines are and why!!!
Kangaroo Court is right that we are lucky to have people dumb enough to invest because if there was no investment the airlines would be in a mess....and that means jobs
But Skystar...you can address the stock exchange tomorro and be on CNN and let them know what a sterling investment the airlines are and why!!!
Why bother buying 4 more aircraft if you cant crew what you already have!
If they are splashing money around on vb shares and more aircraft how about they invest some money in pilot wages might go a long way.
If they are splashing money around on vb shares and more aircraft how about they invest some money in pilot wages might go a long way.
You never know assasin, but I'm afraid if they do, It'll have to be forced upon them.
Latest rumour (crewing wise) is that REX have offered to fund a soon to be bypassed F/O to go away and get some night experience (component for his ATPL), and then come back to start his command training! As most people know, REX will do almost anything except the only thing that will begin to turn this situation around.
Of course the funding was offered in the form of a loan, and the candidate politely told them what they could do with that!
Jesus wept!
Latest rumour (crewing wise) is that REX have offered to fund a soon to be bypassed F/O to go away and get some night experience (component for his ATPL), and then come back to start his command training! As most people know, REX will do almost anything except the only thing that will begin to turn this situation around.
Of course the funding was offered in the form of a loan, and the candidate politely told them what they could do with that!
Jesus wept!