In today’s daily we have covered stock research on Virgin Australia. To view Top 25 Dividend Stocks as per their yield click here

S&P 500 was down by 0.27 points or 0.01% to 1883.68 on Thursday. The market muddled through a session sandwiched between the Federal Reserve's relatively uneventful Wednesday meeting and Friday's scheduled nonfarm payrolls report. Strong manufacturing figures and consumer spending data has given some hope that payrolls figures will confirm a pickup in economic activity after the weak first quarter of growth.

On Thursday, the U.S. car sales posted gains for April, suggesting a rebound from the winter. Shares of General Motors were up 1.2 percent at $34.90.The biggest drag on the S&P 500 was Exxon Mobil which declined 1 percent to $101.41 despite reporting first-quarter earnings that exceeded expectations. Jobless claims unexpectedly rose in the latest week, though the underlying trend continued to point to an improving labor market. U.S. consumer spending recorded its largest increase in more than four and a half years in March.


S&P 500 Daily Chart   (Source – Thomson Reuters)
 
S&P ASX 200 was down by 40.3 points or 0.73% on Thursday and closed at 5448.8 points. Karoon Gas might be preparing for an equity raising worth about $200 Million. Iluka Resources announces ownership interest of National Australia Bank representing 5.12% of the total voting power.

Asciano announces ownership interest of Commonwealth Bank of Australia representing 10.87% of the total voting power. Australia and New Zealand Banking Group reaffirms FY 2014 revenue guidance, saying it remains on track for FY 2014 revenue growth above 4 pct. The Australian dollar has traded in a tight range below US93c for much of the overnight session as investors weigh the latest batch of economic data in the US.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 



Stock of the Day – Virgin Australia (VAH)
 
Virgin Australia Holdings (VAH) is engaged in the airline industry, both domestic and international. The Company operates in two segments: domestic operations and international operations. Domestic operations include operations using the fleet of Boeing B737 aircraft, Airbus A320 and A330 aircraft, ATR aircraft, Embraer E170 and E190 aircraft, and Fokker F50 and F100 aircraft. This segment consists of Australian domestic flying, including regional network operations. The Company's Velocity frequent flyer program is also reported within domestic operations. International operations includes operations using a mix of Boeing B777 aircraft and Boeing B737 aircraft. This consists of Trans-Pacific, Abu Dhabi, Trans-Tasman, Pacific Island and South East Asia flying. Effective March 28, 2014, Singapore Airlines Ltd raised its interest to 22.17% from 19.83% in Virgin Australia Holdings Ltd.

VAH reported a 1H14 underlying pre-tax loss of -$80.4m which was broadly in line with expectations. There was a 4.5% increase in CASK (Cost of Available Seat-Kilometer) and while this is an area of focus for the management it has resulted in significant margin decline in the domestic business. The main drivers of the increased unit costs were contract maintenance and labour costs.


Source - VAH

VAH reported a total cash balance of $896m as at 31^st December, an increase of $316m over the previous corresponding period. VAH’s Brisbane headquarters is now listed up for sale and with book value of $63.1m, this will assist in improving already healthy liquidity levels. Despite the positive RASK (Revenue per Available Seat-Kilometer) growth of 4% it did not offset the significant CASK growth even after adjusting for Skywest acquisition and as such domestic margins fell from 3.7% to 1.5% in the half.


VAH Daily Chart  (Source - Thomson Reuters)
 
While we expect FY14 to represent the low point for the domestic market and by inference, VAH’s profitability, the current CASK growth concerns need to be addressed and then reflected in improved results which to date have remained disappointing. We believe the stock is overvalued at its current price and would review the stock at a later date.

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