Reporting on Tuesday was low-cost airline easyJet (LSE: EZJ). Its shares declined by almost 6% following its first-half update, but are still up by 23% since the start of the year. This performance has been relatively impressive given the challenging nature of the airline industry in recent months.

In fact, easyJet seems to be adequately coping with the difficulties it faces. Could this prove to be the last buying opportunity before its share price resumes the upward trajectory of 2017-to-date?

A difficult marketplace

As mentioned, life has been tough for airline companies such as easyJet in recent months. This was evidenced by the firm’s increasing loss, with its total loss before tax of £236m being much worse than the £18m loss of the first half of the prior year. A key reason for this was a rise in headline cost per seat of 4.9%, while the timing of Easter and high overall market capacity growth also weighed on its financial performance.

Despite this, the company enjoyed a record period for passenger numbers. They increased by 9% versus the same period of the prior year. This reflected easyJet’s low-cost fares and attractive network, which should enable the company to continue to grow passenger numbers. That’s especially the case since it continues to increase capacity through greater investment. For example, capacity increased by 8.4% in the first half of the year.

Looking ahead

In terms of the company’s outlook, it looks set to experience further challenges in the second half of the year. Greater market capacity growth looks set to continue, which could mean that easyJet’s focus on cost control becomes particularly relevant. That said, its bookings for the summer are ahead of last year and it continues to see an improving revenue per seat trend.

This combination, though, is not set to be sufficient to enable a rise in earnings in the current year. The company’s bottom line is due to fall by 30% in 2017. However, a return to growth of 17% next year suggests the outlook for the business remains upbeat. And since it trades on a price-to-earnings growth (PEG) ratio of just 0.8, now could be the perfect time to buy it for the long run.

Sector peer

Also offering upbeat long-term growth potential is sector peer Fastjet (LSE: FJET). The Africa-focused airline has endured a period of major change of late, with a rationalisation of its routes, changes to the aircraft it operates and a head office relocation all taking place. It has also conducted a fundraising, while at the same time seeking to lower costs and develop sustainable growth for the long term.

With Fastjet forecast to move into profitability next year, its share price could gain a boost from improving investor sentiment. Since it trades on a forward price-to-earnings (P/E) ratio of 13.2, it appears to offer value for money for the long term.

The post Is this the last great buying opportunity for easyJet plc? appeared first on The Twelfth Magpie.

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• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Peter Stephens owns shares of easyJet. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The intention is that the acquisition will be implemented via a court-sanctioned scheme of arrangement, and ARM’s directors are unanimously recommending that shareholders vote to approve the scheme, which should happen as soon as practicable in Q3.

With the shares trading at 1,675p, as I’m writing, there’s little upside for buyers today if the deal goes ahead: a mere 1.7% including the 3.78p interim dividend holders will receive on top of the 1,700p return.

Analysts are divided on the likelihood of a counter-bid coming in. I wouldn’t buy today on the hope of such a bid, but if I already held the shares I’d be inclined to hang on just in case another suitor emerges with a higher offer.

Out with the old, in with the new

Shares of Stanley Gibbons (LSE: SGI) dived on a profit warning last autumn, and completely cratered earlier this year when it emerged that things were so dire an emergency fundraising was required.

The troubled stamps and collectibles group, whose shares had traded at 300p not much more than a year earlier, raised £13m at just 10p a share. However, following a corporate and audit update, and a boardroom clearout, announced last Friday, the shares have stormed up to 14.37p this week.

The good news is that the company has already exceeded the targeted annualised operating cost savings of £5m it set out in March and management has identified further savings. Past accounting was clearly over-aggressive, and there will be restatements and writedowns reducing net asset value. However, these won’t impact the cash position, and together with the departure of the executives who oversaw the destruction of shareholder value, a line seems to have been drawn under the inglorious past.

I like Stanley Gibbons’ new strategy of “realigning the business around predictable revenue streams, such that the company does not have to rely upon material one-off high value sales or major auction consignments to achieve profitability.” However, I believe prudent investors would be wise to wait for the company’s results and some visibility on future earnings.

Wheels up, or wheels off?

Fastjet (LSE: FJET) is another small-cap whose shares have collapsed from pounds to pence. Profit at the African budget airline has failed to get off the ground, and amid boardroom turmoil, the company was hurtling towards the end of the cash runway.

However, the shares rocketed from 23p to as high as 41p yesterday, following the announcement of a £15m fundraising. And a bizarre fundraising it was too. The price was set at 50p (a whopping 116% premium), in order — the company told us — for a number of fund managers “to satisfy their internal ownership limits”. What does that mean? Well, you’ll get a good idea if you can imagine a ‘Dragon’ on Dragon’s Den being offered, say, a 30% share in a business for £100,000, and saying: “No, but I’ll give you £100,000 for a 15% share“!

Good news though the funding is for Fastjet, potential profitability is both far off and uncertain, so, as with Stanley Gibbons, I think this is another case of ‘wait and see’.

The post Should you buy this week’s flyers ARM Holdings plc, Stanley Gibbons Group plc and Fastjet plc? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Shares in Africa-focused airline Fastjet (LSE: FJET) have slumped by 14% today after it released a disappointing trading update. It states that the trading environment in which Fastjet operates has remained challenging and although the yield per passenger figure continues to improve, passenger numbers are still lower than expected. Furthermore, signs of recovery in international services are lacking.

Load factors have fallen to just 47% from 70% in the same period of 2015. As such, new CEO Nico Bezuidenhout is in the process of identifying changes to Fastjet’s fleet and routes flown, ahead of starting work as CEO on 1 August. Worryingly, Fastjet remains cash flow negative and in order to have sufficient working capital to continue, it now requires additional fundraising. It has therefore commenced the initial phases of a fundraising exercise, which it expects to complete next month.

Clearly, this is a challenging period for Fastjet. While it has excellent long term potential, now does not appear to be the right time to buy it, owing to the very uncertain short-term outlook.

A high level of interest

Also facing uncertainty is UK-focused housebuilder Redrow (LSE: RDW). It has today released a bullish trading statement after recording a pretax profit for the 2016 financial year that’s above the top end of analysts’ estimates. This shows that the company has performed well despite the uncertainty in the run-up to the EU referendum. Redrow has also reported a high level of interest in the days following the vote, although it is clearly still very early days.

Looking ahead, Redrow’s share price could come under pressure if the UK housing market experiences falling transactions and lower prices. So a wide margin of safety is required in order to compensate for the higher risk which the company faces. Redrow’s price-to-earnings (P/E) ratio of 5.9 indicates that its shares offer a favourable risk/reward ratio. Although volatility may be high in the coming days and weeks, Redrow looks good value for long-term investors.

Strong for the long term

Similarly, Old Mutual (LSE: OML) also trades on a relatively low valuation. The financial services company, which is in the process of a managed separation, has a P/E of only 10.5, suggesting that there is upward re-rating potential on offer.

Certainly, Brexit will not change its current strategy, but in today’s update Old Mutual confirms that it may impact on the underlying performance of its business units. This could mean that the company’s share price performance is somewhat volatile in the short run. Its beta of 1.8 confirms that Old Mutual is likely to provide a less stable shareholder experience in the short run.

Regarding its long term prospects, the managed split could create additional shareholder value through greater efficiencies. Old Mutual remains a well-capitalised business, with excellent long term growth prospects, as well as an appealing yield of 3.8%. So, for long term investors who can cope with further currency fluctuations and an uncertain outlook for equity markets, I think Old Mutual remains a strong long term buy.

The post Are Old Mutual plc, Redrow plc and Fastjet plc ‘buys’ after today’s updates? appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Peter Stephens owns shares of Old Mutual and Redrow. The Motley Fool UK has recommended Redrow. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Clearly, the recent past has been rather challenging for Fastjet, with shareholder unrest causing investor sentiment to come under a degree of pressure. And due to operating challenges, the company’s financial outlook has also been rather uncertain and this has been reflected in Fastjet’s share price fall of 52% since the turn of the year.

Looking ahead, Fastjet is expected to remain lossmaking in each of the next two years and while a new CEO could be the catalyst to deliver improved performance in the coming years, it may be prudent to await further news on a new strategy before piling-in. Certainly, the African airline industry has huge growth potential, but the timing doesn’t appear to be right to buy Fastjet at the present time.

Shares on the rise

Also rising today are shares in Koovs (LSE: KOOV), with the India-focused fashion company recording a rise of 10%. This comes a day after Koovs announced a capital raising of around £3m from HT Media through the issue of 12m new shares in the company. This forms part of Koovs’ capital-raising strategy, with it being in addition to £300,000 raised from Dragon Asia Holdings and the £21.9m raised earlier in the year.

In terms of its long-term outlook, Koovs has significant growth potential and appears to have the capital required to deliver on its strategy. However, with it being a lossmaking business and forecast to remain so in each of the next two financial years, there may be better opportunities available elsewhere. That’s especially the case since a number of UK-listed retail stocks offer wide margins of safety at the present time while also being highly profitable.

Brexit woes

Meanwhile, shares in SThree (LSE: STHR) have fallen by around 8% today after the specialist staffing company released a rather disappointing half-year trading update. It said the uncertainty caused by the EU referendum has led to a slowdown in its UK business, with it experiencing mixed trading conditions during the period.

Specifically, SThree’s Energy, UK business and Banking & Finance divisions performed relatively poorly, but this was offset to a large degree by strong growth from the company’s European operations and across its ICT business. As such, SThree’s group gross profit rose by 6% versus the first half of the prior year and it remains confident in its long-term outlook.

With SThree trading on a price-to-earnings growth (PEG) ratio of 0.6, it seems to offer a sufficiently wide margin of safety to merit investment at the present time. Clearly, there are short-term risks from Brexit and its financial performance in the short run may come under a degree of pressure. But for long-term investors it remains a sound buy.

The post Why are Fastjet plc (+15%), SThree plc (-8%) and Koovs plc (+13%) among today’s major movers? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Gulf Keystone

Gulf Keystone operates in the Kurdistan Region of Iraq, where a refugee crisis and the battle against ISIS have first claim on the regional government’s funds. Monthly payments to Gulf Keystone are barely enough to maintain production, let alone enable it to repay $250m of guaranteed notes and $325m of convertible bonds, which mature next April and October respectively.

In a strategic update on 29 April, the company said it had entered into a standstill agreement with noteholders and bondholders regarding a biannual coupon payment of $26.4m, which was due that month. The outcome of Gulf Keystone’s ongoing negotiations with debtholders is critical, because, as the directors say, there is a “need for near-term fundraising and the restructuring of the Company’s balance sheet” (my bold).

In these situations, a big part of that need is often met by the lenders swapping a substantial part of their debt for equity, these new shareholders leaving the existing shareholders with only a fractional proportion of the enlarged equity.

At what share price would such a debt for equity swap take place? Well, the current market pricing of the notes, bonds and equity suggests at a substantially lower share price than the current 4.6p. In this light, I believe selling the shares would be the most prudent move, as there is the potential to buy back into a stronger, re-financed company at a lower price.

Xcite Energy

High noon with debtholders is even nearer for North Sea oil firm Xcite Energy than for Gulf Keystone. Xcite has $135m of bonds that are due for repayment at the end of the current month and only $14m of cash available at the last reckoning.

As the company said on 24 May: “These circumstances indicate the existence of material uncertainty in relation to the Group’s ability to continue as a going concern”. Like Gulf Keystone, Xcite is locked in negotiations with bondholders.

Also like Gulf Keystone, there is no sign of a cash-rich partner coming to the rescue at this stage or any whispers of bondholders being prepared to simply roll over the debt without a balance sheet restructuring. Again, Xcite’s shareholders appear hugely vulnerable to being diluted in a debt for equity swap as part of a restructuring of the company’s balance sheet. As such, I have to rate the shares a sell at their current 10.75p.

Fastjet

Legendary investor Warren Buffett absolutely despises airlines as investments, seeing no merit whatsoever in them. It’s a tough business to make sustainable profits from at the best of times, but trying to establish a budget airline in Africa, as Fastjet is doing, seems a particularly tough task.

The company has been burning cash at a rate of knots, and appears to have been over-ambitious in its expansion to the extent that major shareholder and brand owner Sir Stelios Haji-Ioannou has successfully campaigned to oust a number of directors, and now has the chairman in his sights to complete the clearout.

Fastjet is another small cap in big trouble, but one thing in its favour is that it has no debt (thanks to a £50m placing in April 2015). However, cash is running out. In its results last week, the company said its cash flow projections are sensitive to such things as a tough trading environment and aviation fuel prices which are currently not hedged; and that it “expects to raise further funds in the near future to provide additional headroom”.

A discounted placing at below the current share price of 25.75p would be no surprise, and I believe the shares are best avoided until the company’s future is clearer.

The post 3 small caps in BIG trouble? Gulf Keystone Petroleum Limited, Xcite Energy Limited & Fastjet plc appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Re-rating on the cards

This was partly as a result of a dip in revenue to £290m from £304m in the prior year, with the company’s international division in particular experiencing difficult trading conditions. And with Laura Ashley’s bottom line also being hurt by an exceptional charge of £1.3m relating to its licence partner in Australia being placed into voluntary administration, it is little wonder that its financial performance worsened versus the prior year.

With Laura Ashley’s share price having fallen by 12% in the last year, it now trades on a price to earnings (P/E) ratio of just 9.8. This indicates that an upward re-rating is very much on the cards and with the company continuing to offer long term profit growth potential, it could prove to be a sound buy.

Negative impact

Also in the news today is Africa-focused budget airline Fastjet (LSE: FJET). Its shares have been hurt of late by a disagreement with shareholder easyGroup, with an allegation that the airline is in breach of two clauses of a license agreement. Fastjet denies this and, unfortunately for its investors, the disagreement is being played out in public, which is having a negative impact on the company’s share price. In fact, it is down by 6% toda, which takes its fall in 2016 to 55%.

Of course, not all of this decline is due to the disagreement with easyGroup. Fastjet is experiencing challenging trading conditions which according to its latest trading update are lasting for longer than anticipated. And with the company’s CEO stepping down, there is added uncertainty at the present time. Therefore, it seems to be prudent to watch, rather than buy, Fastjet until there is an indication of a more stable near-term outlook for what could prove to be a highly profitable business.

Enticing income play

Meanwhile, shares in Rio Tinto (LSE: RIO) have also disappointed in recent months, being down by a third in the last year. Although they have reversed some of their decline as the price of iron ore has stabilised somewhat in recent weeks, the future for Rio Tinto and the wider iron ore industry is likely to be highly volatile and uncertain. This means that obtaining a sufficiently wide margin of safety before buying is imperative.

On this front, Rio Tinto appears to be relatively appealing. It trades on a price to earnings growth (PEG) ratio of just 0.5 and this indicates that it offers growth at a very reasonable price. And with Rio Tinto still yielding around 3.7% even after its decision to rebase its dividend, it continues to be a rather enticing income play for the long term. As such, it seems likely that its shares will reverse at least part of their decline from the last year.

The post Will Laura Ashley Holdings plc, Fastjet PLC And Rio Tinto plc’s Share Price Declines Continue? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Rio Tinto. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This move has been well received by the market because it will cut Genel’s future outgoings significantly. Genel has cash on hand of about $450m. It makes sense to use some of this money now, as it’s not really generating any returns for the firm.

The savings are potentially significant.

Genel has $750m of outstanding bonds, which are due for repayment in 2019. These bonds have a coupon, or interest rate, of 7.5%, so interest costs are about $56m per year.

However, the low oil price and the risks involved in operating in Kurdistan mean that Genel’s bonds have fallen heavily. They currently trade for around half their face value. Buying them back at a discount to face value will reduce the amount Genel has to repay in 2019. It will also reduce the group’s interest bill in the meantime.

Reserves update

Genel also slipped out a second piece of news this morning, providing an update on its oil reserves. Today’s update deals with the Tawke field, in which Genel has a 25% stake. Proved reserves for this field were upgraded by 21% from 319m to 387m barrels of oil, thanks to an improvement in recovery rates.

Although there was a reduction in probable reserves, the increase in proved reserves bodes well for near-term production, in my opinion.

Genel shares remain a risky buy but there’s no doubt in my mind that the company is one of the more attractive options in this high-risk sector of the market.

Fastjet

Shares in troubled African budget airline Fastjet (LSE: FJET) are down by 20% as I write, after easyGroup chairman Sir Stelios Haji-Ioannou published online a letter he sent to Fastjet.

easyGroup has a 12.6% shareholding in Fastjet and also owns the Fastjet brand. The letter from Sir Stelios alleged that Fastjet is only selling 10% to 15% of the seats on one of its main routes, between Dar es Salaam and Nairobi.

Sir Stelios also said that recent mystery shopper activity has shown that the airline isn’t operating flexible pricing for seats or allowing credit card payments at its Dar office. The letter suggests that fixed pricing is contrary to airline best practices and is likely to be one reason for poor ticket sales.

The letter also asks why Fastjet hasn’t published any monthly passenger statistics since November. The implication is that this has been stopped in order to hide the bad news from shareholders.

Sir Stelios’s final concern is that Fastjet may run out of cash in the next few months. The airline could potentially be forced into insolvency, damaging the brand. He’s asked to be given access to cash flow forecasts and passenger statistics.

I’m sure that all Fastjet shareholders would like to know the answers to easyGroup’s questions. However, in a response published this morning, it didn’t provide any new information. Instead, Fastjet simply complained about the letter being made public and threatened easyGroup with legal action.

In my view this suggests that many of the accusations in the letter may be true. Fastjet shares could continue to fall, in my opinion, although an easyGroup-backed rescue may be possible.

The post Should You Buy Or Sell Today’s Big Movers Genel Energy PLC & Fastjet PLC? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Roland Head has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The challenging trading conditions that are affecting the African aviation industry have lasted for a longer period than originally anticipated by Fastjet’s management. Therefore, it expects to report results for 2016 that are materially below current expectations and doesn’t expect to be cash flow positive this year.

Clearly, this is disappointing news for the company’s investors. And while Fastjet has $20m in cash and is targeting cost savings through route rationalisation and reduced capacity, it states in today’s update that a fundraising may be needed later this year.

Looking ahead, Fastjet has huge potential to deliver impressive profit growth in the long run. The African aviation industry remains highly appealing for long-term investors, but with the company facing such an uncertain near-term future, it seems prudent to watch rather than buy Fastjet at the present time.

What’s the alternative?

That’s at least partly because there are a number of other enticing options within the aviation space. One example is budget airline easyJet (LSE: EZJ). Its shares have disappointed in 2016, falling by 12% and underperforming the FTSE 100 by 11% since the turn of the year. However, it continues to offer excellent growth prospects, with net profit due to rise by 7% in the current financial year, and by a further 15% next year.

Such impressive growth rates don’t command a high rating at the present time however, since easyJet trades on a price-to-earnings (P/E) ratio of just 10.3. This puts easyJet on a price-to-earnings growth (PEG) ratio of 0.7, which indicates that its shares offer growth at a reasonable price.

Furthermore, easyJet continues to be an excellent income play. Its shares yield 3.9% and with dividends due to rise by 18.3% next year, it’s set to yield 4.6% in 2017. And with dividends being covered 2.4 times by profit, there’s plenty of scope for additional rises in shareholder payouts in the medium to long term.

Value for money

Also worthy of purchase in the aviation space is British Airways owner IAG (LSE: IAG). Like easyJet, its shares offer superb value for money, with a low valuation and double-digit earnings growth combining to produce a PEG ratio of 0.5. And with the price of oil set to remain low over the medium term and the global economic outlook continuing to be positive in the long run (despite recent volatility), IAG appears set to benefit from an economic tailwind over the coming years.

Despite failing to pay a dividend for a number of years, IAG has quickly become a relatively appealing income stock. It’s due to pay out 19.8p per share in dividends in the current financial year, which puts it on a yield of 3.7%. And with dividends being covered 4.3 times by profit, it seems likely that shareholder payouts will rise at a rapid rate moving forward, thereby offering improving income prospects as well as a potential catalyst for the company’s share price.

The post Will Fastjet PLC, easyJet plc And International Consolidated Airlines Group SA Boost Your Portfolio Returns? appeared first on The Twelfth Magpie.

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• Up 47% in a year! Now see what the booming IAG share price could be worth in 12 months
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?

Peter Stephens owns shares of easyJet. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

While Fastjet is expected to post a pre-tax loss of £21m for the 2015 financial year, its bottom line is forecast to move into profit in the current year. In fact, Fastjet is due to report a pre-tax profit of £6m in 2016 and even though its shares have risen by such a large amount in recent weeks, it still trades on a price-to-earnings (P/E) ratio of just 8.1.

Clearly, such a low valuation may be of interest to value investors searching out a bargain. However for Warren Buffett, Fastjet may not hold great appeal. That’s because he has tended to buy stakes of well-established companies that don’t require any kind of turnaround. In fact, on that topic he’s believed to have said that turnarounds seldom turn. As such, the fact that Fastjet is a lossmaking company that’s due to move into profitability may mean that it lacks appeal in his view.

Better off with BA?

More likely, Warren Buffett would purchase established companies that have relatively wide economic moats. Among airlines, British Airways owner IAG (LSE: IAG) is probably the company with the largest economic moat. That’s because in an industry in which consumers are highly price-conscious, British Airways retains a high degree of customer loyalty. This allows it to charge a higher price than many of its rivals, with lucrative take-off/landing slots also helping it to deliver relatively resilient financial performance.

Looking ahead, IAG is expected to increase its bottom line by 36% in the current year and while its shares have risen by 263% in the last five years, they still trade on a P/E ratio of just 7.2. This indicates that there’s major upward rerating potential ahead – especially with the price of oil set to remain low.

Don’t just book it… buy it

Similarly, buying Thomas Cook (LSE: TCG) could also be a good move. It has a degree of customer loyalty that has been built up over a long period, thereby providing it with a relatively impressive economic moat. However, with holidays being more cyclical than scheduled flights, Thomas Cook’s long term financial performance may be more volatile than that of IAG.

Still, with Thomas Cook forecast to increase its bottom line by 27% in the current year and having a P/E ratio of only 9.2, it remains a stock that could be of interest to value investors such as Warren Buffett.

The post Would Warren Buffett Buy Fastjet PLC Instead Of Thomas Cook Group plc And International Consolidated Airlines Grp SA? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Digger drives higher

The mining sector received a welcome boost in Tuesday business following reports that China is poised to introduce further monetary stimulus in an attempt to rescue the flailing domestic economy.

According to Bloomberg, China’s leaders, meeting at its latest Central Economic Work Conference, stressed the need to widen the fiscal deficit and stimulate the housing market. Policymakers also emphasised the need for monetary policy to become more “flexible” and fiscal policy more “forceful” in order to pave the way for structural reforms.

Diversified giant BHP Billiton (LSE: BLT) was one of those caught up in the updraft, with the company’s stock price adding 0.6% from Monday’s close. But I do not believe investors should get carried away by this latest announcement — after all, key economic data continues to struggle despite a string of supportive initiatives rolled out by Beijing in recent years.

Instead, I reckon shrewd investors should remain on the sidelines until economic indicators from the Asian powerhouse shows signs of marked improvement. This is particularly important as commodity producers continue to flood the market with unwanted material, worsening already-chronic supply/demand imbalances.

BHP Billiton is expected to record  a 58% earnings decline in the year concluding June 2016, creating the fourth decline in five years if realised. But despite the firm’s sickly revenues outlook, shares prices remain in line with a P/E rating of 24 times, way above the benchmark of 15 times that represents attractive value.

One reason for this is that dividend forecasts remain generous. It is true that BHP Billiton is anticipated to follow the likes of Glencore and Vedanta Resources and cut the payout — last year’s payout of 124 US cents per share to 115 cents in fiscal 2016. But this projection still creates an eye-popping yield of 9.8%, prompting many investors to plough in.

But the predicted dividend dwarfs anticipated earnings of 50 cents per share. And with BHP Billiton frantically slashing expenditure and offloading assets to manage its colossal debt pile — which stood at $24.4bn as of June — I believe income seekers could end up sorely disappointed.

Experiencing some turbulence

Africa-focussed flyer Fastjet (LSE: FJET) failed to enjoy a pre-Christmas bump on Tuesday following a disappointing trading update, and the company was last seen dealing 7.2% lower on the day.

Fastjet warned that revenues would fall short of expectations in both 2015 and 2016 thanks to the fallout of the Tanzanian general election. The political fracas has led to “reduced governmental and civil service traffic and lower demand for travel more widely across the country,” the low-cost airline advised.

As well as battling lower passenger numbers, Fastjet advised that currency headwinds are providing an additional headache.

While the emerging markets of Africa provide plenty of long-term growth opportunities, until conditions improve in its critical hub of Tanzania I believe Fastjet remains a risk too far at the present time.

The post Should You Load Up On BHP Billiton plc & Fastjet PLC On Tuesday? appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.