Stocks to Benefit from Trans-Tasman Bubble

  • Jun 06, 2020 NZST
  • Team Kalkine
Stocks to Benefit from Trans-Tasman Bubble

Summary

  • Prime Ministers of NZ and AUS are in talks to introduce a trans-Tasman COVID-safe travel zone
  • More than 1.5 million Australian residents arrived in NZ in the year to September 2019
  • THL has begun its consultation process to match its current and future business requirements
  • AIR witnessed huge drop in passengers

The Prime Minister of New Zealand, Rt Hon Jacinda Ardern and Prime Minister of Australia Hon Scott Morrison MP have announced that they are committed to introduce a trans-Tasman COVID-safe travel zone. Both the Prime Ministers have decided to start work on a trans-Tasman COVID-safe travel zone that will relieve travel restrictions between Australia and New Zealand. Such plan would be put in place when it is secure to do so and required health, transport and other procedures had been established and met, to guarantee the protection of public health.

These arrangements acknowledge that New Zealand and Australia are both successfully addressing the spread of COVID-19.

For the year ended September 2019, the total overseas visitor arrivals stood at 3.9 million up by 2.5 per cent or 94,300 as compared to previous year. The biggest variations in visitor arrivals were seen from the Australian region, up by 55,700; then from the United States market, up by 28,600; and then from Chinese market, down by 39,900.

 

Key Data (Source: Ministry of Business, Innovation & Employment)

More than 1.53 million Australian residents visited NZ in the year ended September 2019, up by 3.8 per cent as compared to last year.

With the opening of border, the stocks which might benefit are travel related stocks. Since the lockdown restrictions were implemented, the travel-related stocks were most impacted as their operations were deeply hampered by the travel ban.

Let us look at few stocks which can benefit from the ease.

Tourism Holdings Limited (NZX: THL)

In the release dated May 26, 2020, Tourism Holdings Limited (NZX: THL) stated that it has started consultation procedure throughout the parts of its NZ business, with the objective of fitting crew numbers to present activity levels as well as expectations for the coming months.

  • In NZ, the company has been seeking alternative revenue since the implementation of coronavirus restrictions. At the same time, the company is accessing COVID-19 Wage Subsidy scheme for supporting people.
  • THL’s business in the USA has done staffing changes in the month of April 2020. Its business in Australia is using 6-month JobKeeper subsidy. Notably, Australian business is also reviewing ongoing crew structures.

 

Stock Performance

The stock of THL closed the day’s trading at NZ$2.350 per share on 5th June 2020, up by 0.43% on an intraday basis. The company has a market capitalisation of around $347.835 million and has a gross dividend yield of 7.146%.

Air New Zealand Limited (NZX: AIR)

Air New Zealand Passengers Numbers Down 99 Per Cent

Air New Zealand Limited has provided major highlights for the month of April 2020 and the passengers carried during the month decreased by 98.9 per cent as compared to previous year. On YTD basis, total passengers carried decreased by 12.5 per cent.

Key highlights of the month are given below:

 

Key Data (Source: Company Reports)

Air New Zealand Declares Executive Changes

Air New Zealand Limited has decided to reduce the size of the Executive team as the company is reducing its scale of operations due to the impact of coronavirus pandemic. The CEO of the company, Greg Foran has decided to reduce the size of Executive team to six from nine.

Liquidity Position of the Company

Before the outbreak of the pandemic, the airline was in great position with a strong balance sheet and had more than $1 billion in short-term liquidity. Once the restrictions were implemented on international travel in March 2020, the company quickly moved to secure a loan facility of up to $900 Mn with the NZ Government, to increase liquidity and offer the company with enough flexibility to respond to the range of potential demand recovery scenarios.

The company has executed various measures across every part of its capital expenditure portfolio and cost base, including:

  • Reduction in labour of about 30 per cent, or 4,000 employees, which is projected to drive annualised savings of $350 Mn to $400 Mn;
  • Suspension of all short-term incentive schemes for FY20;
  • Reduction of the Executive team by 30%;

 

2020 Earnings update and outlook

In the second half of 2020, the company’s network capacity is anticipated to be roughly 50 per cent less than the pcp, led by a reduction of about 90 per cent in the fourth quarter. Notably, the company is now anticipating to post an underlying loss for 2020 financial year.

Stock Performance

The stock of AIR closed the day’s trading at NZ$1.640 per share on 5th June 2020, up by 8.61% on an intraday basis. The company has a market capitalisation of around $1.841 billion. Notably, its gross dividend yield stood at 10.118%

Auckland International Airport Limited (NZX: AIA)

AIA Announces Change in Executive Team

The company has announced some changes in its executive team. Richard Barker, the General Manager Retail and Commercial, would be leaving the company on June 30, after six years.

During the month of March 2020, Auckland International Airport Limited reported total passenger volumes of 1.084 million, down by 42.0% as compared to last year. The international passengers declined by 43.2%, domestic passengers declined by 40.1% and transit passengers declined by 49.5%.

  • This decline in numbers reflect the impact of the travel restrictions imposed by the New Zealand Government;
  • On 14 May 2020, the country entered Alert Level 2 and the airline will operate up to 20% of pre-Covid-19 capacity.

 

Stock Performance

The stock of AIA closed the day’s trading at NZ$6.960 per share on 5th June 2020, down by 1.97% on an intraday basis. The company has a market capitalisation of around $10.248 billion and its gross dividend yield stood at 2.201%.

 


Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.

 

   
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