Jeremy Hutton: Milford Asset Management Equities Analyst on Air New Zealand's financial year results

Air New Zealand's financial results are out tomorrow - and hopes aren't flying particularly high. 

The airline has been hit with plane engine troubles, increased competition and decreased consumer demand.

Milford Asset Management's Jeremy Hutton outlined some predictions about the airline's financial state.

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Episode Transcript

Speaker 1 (00:00):
Jeremy Hutton, Milford Asset Managements with us.

Speaker 2 (00:02):
Now, hey, Jerremy, evening, Heather.

Speaker 1 (00:04):
So Precinct Properties, we had them reporting today They've got
some exciting building projects on the go, aren't they.

Speaker 2 (00:10):
Yeah, that's right. So Precinct is a large listed real
estate company on the inside X and they've been very
active in some high profile property developments over the past
few years, such as Commercial Bay and Number one Queen Street.
And they do have another future project on the books,
and this is the downtown car Park site in Auckland
and it will be no exception to high profile as well.

(00:33):
So Precinct related that they'd had a development agreement sorted
today on that and then also had submitted a resource
content too, So potentially another large prime office building and
another large tower block up in the Auckland skyline.

Speaker 1 (00:48):
Cool stuff. Hey, on that downtown car park site, have
they already got a large tenant lined up?

Speaker 2 (00:53):
Yeah? They did mention that they are in exclusive negotiations
for another major occupier for forty percent of the office
space in that building. And this is there even though
it won't be finished until after twenty thirty. So highlights
to me the continued demand for prime office space from
tenants in Auckland. But the challenge for me from here

(01:14):
will be the funding side of this build. Investor demands
to fund office has been pretty weak globally and this
is due to some of the low office occupancy rates
post COVID, but prime New Zealand office has actually performed
pretty strongly. But the sentiment remains a week for officer investors,
so potentially they might not contribute to this one.

Speaker 1 (01:35):
Jeremy, would it be fair to say that Precinct is
seeing better returns from the residential developments then.

Speaker 2 (01:39):
From office, Yeah, one could say that. I mean Precinct
has got a very solid residential development strategy as well.
They've been targeting mid to high end departments and key
locations like Parnell, Auckland Domain and Dominion Road. And they're
also venturing into student accommodation in central Auckland as well,
and today announced that they have found a capital partner

(02:02):
to help with that project on Quin Street, So one
could take that as a strong endorsement for that strategy.
And then just the final point, the listed real estate
companies are in an interesting space right now. They're on
It's traditionally one of the most interest rates sensitive sectors
out there, and given the LBNZ it's fairly dubbish pivot recently,

(02:24):
some of those headwinds from interest rates that their face
over the past few years could be turning around into
a tailwind.

Speaker 1 (02:30):
Now on anyw Zealand, what are you expecting for tomorrow?

Speaker 2 (02:34):
Yeah, it's fair to say in New Zealand will report
a fairly challenging result tomorrow for its twenty twenty four
financial year. And to be honest, they've been hit from
all angles recently. The plane engine issues in particular impacting
the number of planes that they can fly, so this
has reduced volume, which is a key metric. And then
there's also been an intense competition, particularly on the North

(02:58):
American routes as well. And at the same time, as
we know, flying or traveling is discretionary and the consumer
demand has fallen away post the post COVID travel booms.
So the outlook twenty twenty five will be interesting. I
suspect it will be pretty downbeat stall with only really
there and pot costs for jet fuel having moved in

(03:18):
there in the airline's direction over the past few months.

Speaker 1 (03:23):
Tell you what jeremy interesting times really appreciate your time.
That's Jeremy Hatton of Milford Asset Management. For more from
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