Corona Virus..... Govt Stimulus? Where to now?

'Cabin fever': Australia must prepare for the social and psychological impacts of a coronavirus lockdown

 

The govt stimulus is rubbish. If you ask the airlines and restaurants if they’re getting any customers coming back, the answer will be no.

Reducing taxes is not helpful because people who are not profitable don’t pay taxes hahaha.

People forget peak to trough in a recession (97, 01, 08) is around 40-50%. Corrections are 10-15%. Clearly this has passed correction territory and is halfway through Peak to trough territory. Fast money is on the short side now. People say these stocks look cheap - on what basis? $3 is cheaper than $6? What does that even mean lol. The smarter ones tell me Qantas is on 7x PE. That’s assuming the E has stayed the same and hadn’t gone negative. I think it should more like minus 5 PE since the E is now a loss. There’s going to be so much money made from writing calls, puts and shorts.

 

Would you really play in this space?

 

And thats if they come through intact, there are always a few high profile companies that never make to the end 9f the tunnel.
Some big news later this week will be the job numbers for February.

 

I think it will get worse but I don't know where the bottom is. That's why most are buying in slowly on the way down as they also don't know where the bottom is.

 

Absolutely.

I would not be surprised Virgin of Qantas went just .... check latest news. I’m going to short them even harder

 

Any chance you could explain how you will short them? Will you buy your shares tomorrow morning, then sell by the end of the day?

 

The easiest way is to ask someone like a Macquarie to set you up with a short account. It’s hard to do it alone without a prime broker account with a global investment bank.

 

For investors?

 

Would you factor in a Gov bailout in that thesis or thinking just a short term play?

 

Isolated, can't go out. What to do?

 

The irony of giving all those golden oldies $750, is over the next week or two there will probably be a b8g campaign to get to self isolate from the general population and stay at home , similar to whats happening in the U.K, and mainly to protect them from the virus.

 

The Govt will bail Qantas. Although they’ll be behind the 8 ball

 

Why will qantas need bailing? They have over 3billion on hand without crazy debts. They could easily ground their entire feet for ages and still survive.

 

I think they have more like $3.3bn net debt (incl $1.7bn Cash) on a trailing annualised EBITDA of around $3.3bn. So 1x nd/ebitda.

They’re running ultra thin margins of around 18% EBITDA margins. Their fuel costs which are $4bn annualised are hedged I think at higher oil prices. Assuming they can’t cut the rest of the $10bn annualised costs fast enough, a 30% fall in revenue would almost wipe their EBITDA and they’ll be in breach of covenants without knowing what they are - but I’d imagine it would be 2.5x Nd/ebitda or 3x. I’d imagine their revenue has fallen 60%. Of course it’s temporary, but if it’s sustained the bank’s will be calling.

Mind you once you factor in capex, a 30-40% fall in revenue would probably put them in negative cashflow territory. This is all annualised so if the issue is over in 2 months then it’s all fine

 

We are down to 5000 on the all ords. I knew the gain would get reversed. Won't be long before we see 4500 I reckon

 

Anything you are targeting omni? Webjet was looking pretty good today

 

Yea I think Webjet is pricey. Based on 1HFY20, they're on 11x FY20 PE, even after having their share price fell so much. I mean that's ridiculously expensive even if they were not having issues in this kind of market.Why wouldn't I buy say Virtus for 6-7x instead.

The Webjet business has always been a bit of a thorn for the past 2 years - it was barely growing in good times, let alone now. Margins are getting smashed in booking industry in general anyway. Imagine the discounts competitors are offering. Their real jewel in the crown has really been WebBeds, but 40% of that TTV comes from Europe. I read somewhere that bookings in China last month on AirBnb was down 90%. Imagine this business.

Another way to look at it is across the whole group, 62% of earnings comes from B2B. I'd imagine there's limited B2B going on now also. The real risk is whether PE would make a move now - which as been talked about - but I'd be surprised any PE is moving in this market. Why wouldn't they wait for the dust to settle?

 

Will be dead cats along the way. Don't forget in GFC/AFC/01 markets fell 40%+ peak to tough. Even 16 China currency crunch fell 32%... we're not even at 32% yet.

 

What do you use for your portfolio evaluations? You certainly look into things with great depth. Love the insight you take