KEY POINTS:
Air New Zealand is being tipped to triple its pre-tax profits in the next four years.
Forsyth Barr analyst Rob Mercer, in a research note, upgraded his profit forecast for the national airline for the year to June 30 to $205.5 million before interest and tax, up $50.3 million.
He forecast that would rise to $497 million in 2010.
Even those forecasts were conservative, Mr Mercer said.
The key profit driver was a well timed fleet upgrade, which would give Air New Zealand a capital expenditure holiday for the next five years, allowing the airline to generate about $1.7 billion in free cashflow over the next five years.
He also expected Air New Zealand to pay an 8-cent a share dividend in 2008, up from 5c.
As forecast net debt of $182.7 million for 2007 turned to $120.2 million cash in 2008, and exceeded $1 billion cash by 2011, shareholders could expect special dividends in the next few years, Mr Mercer said.
Air New Zealand is about 80 per cent state-owned following a taxpayer-funded rescue in 2001.
Mr Mercer increased his valuation for Air New Zealand shares from $1.52 to $2.20 and recommended investors buy the stock. The shares closed at $1.94 on Friday, up 2c.
- NZPA
