Nightmare on At midyear, Hawaii stocks represented everything that was right about the state's economy.
Wall Street
Hawaii stocks tumble as tourism and
the state's economy suffer a major blowBy Dave Segal
dsegal@starbulletin.comVisitor arrivals on a near-record pace. Rising home sales. Expanded routes and new fleets for the islands' top two airlines.
But that all changed 11 days ago in a blur of plane crashes and crumbling buildings. Now, Hawaii's economy, like that of the rest of the country, appears to be caving in to the terrorist attacks.
Hawaii companies' shares, which had been slipping the past three months as the mainland slowdown spread west, were given a downward push when U.S. stock exchanges finally opened Monday after being closed for four business days. The trading week ended yesterday with all 14 members of the Bloomberg Honolulu Star-Bulletin Index losing ground for the five-day period and the Dow Jones Industrial Average posting its worst weekly point loss -- 1,369.70 points -- since the Great Depression.
"Assuming Hawaii stocks mirror the whole economy, I think the base of the Hawaii economy and tourism is fairly murky now and hard to see," said Harlan J. Cadinha, chairman and chief executive officer of Honolulu-based money management firm Cadinha & Co.
"We're very, very consumer-attitude related, and when confidence returns to American consumers, we can expect them to take their typical vacation. But right now, Americans are not looking toward traveling. It's really not a high priority in most lives. So I think as far as tourism is concerned, it has a fairly bleak outlook. I don't want to venture when it changes, but it's probably in effect though this Christmas."
No better place was that reflected this week than in the aviation industry, where airline after airline cut flights and employees. Hawaii wasn't immune to those reductions either, as Hawaiian Airlines Inc. -- whose stock plunged more than 20 percent Monday -- said Thursday it would pare 20 percent of its flights and lay off an unspecified number of workers. Hawaiian Air's stock, which was the Bloomberg Honolulu Star-Bulletin Index's top performer at midyear with a 79.3 percent gain, ended the five days down 23.2 percent at $2.18. The stock is now up 20.3 percent for the year.
Competitor Aloha Airlines Inc., which is privately held, earlier in the week said it was laying off 250 workers, representing 8.3 percent of its 3,000 employees, and cutting 25 percent of its flights.
While one Hawaii-based market expert sees a rally just around the corner, another thinks it still may be more than a month away.
"I don't want to guesstimate what might happen militarily, but I believe the market will be in its bottom phase later this year because tax-loss selling in September and October will be heavier than usual," said Richard Behnke, principal owner of broker-dealer Abel-Behnke Corp. in Honolulu.
Behnke favors such mainland defense companies as Drexler Technology Corp., which supplies the U.S. government with laser optical smart cards that can be used in the airline industry for security.
"The future is in these biometric cards that can hold the iris of an eye for identification purposes, as well as fingerprints and medical records. It's a foolproof way to eliminate passport fraud."
Cadinha, meanwhile, says the market is looking "worn out" and a rally is imminent.
"At some point in time buyers will prevail," he said. "Just a short-covering really could trigger bargain hunting. We've come 1,200, 1,500 points straight down. I think a 300- to 600-point rally on the upside would not be out of the ordinary."
Besides the airlines, another Hawaii-based company that came under close scrutiny this week was Cheap Tickets Inc., which agreed in August to be acquired by New York-based conglomerate Cendant Corp. Cendant's all-cash tender offer to buy Cheap Tickets' shares for $16.50 apiece expired yesterday.
Neither company was commenting yesterday on whether the deal would go through, and that notion was reflected this week as Cheap Tickets' stock price fell as low as $11 on Monday before surging $1.70 to $14.85 yesterday on late buying ahead of the tender offer expiration. The stock, which is the Bloomberg Honolulu Star-Bulletin Index's top gainer this year with an increase of 52.3 percent, ended the week down 9.7 percent.
Analyst Jim Wilson, who covers Cendant for San-Francisco-based Jolson Merchant Partners, said he's unclear whether the deal will take place.
"Certainly every deal out there could be in jeopardy," he said. "Other than that, I don't know. Cendant has been totally mum because they're trying to assess the impact of the attacks on their businesses."
While Hawaiian Airlines' and Cheap Tickets' stocks took hits during the week, the greatest casualties were suffered by leisure-related companies.
The biggest loser among companies of Hawaii interest this week was American Classic Voyages Co., which operates American Hawaii Cruises and United States Lines in Hawaii waters. The stock, which plunged 55.2 percent for the week to 91 cents, lost 28.9 percent yesterday after announcing that two new cruise ships being built for it by Northrop Grumman Corp. would be delayed a year each and that the price per ship would be increased by $19 million each. The company, which has seen its shares fall 93.5 percent year-to-date, had been embroiled in a dispute over delivery of the vessels.
Things didn't get any better this week for other hotel, resort and travel providers, which all fell at least 35 percent during the period.
ResortQuest Inc., the mainland owner of Aston Hotels & Resorts, which operates 33 hotels and resorts in Hawaii, yesterday fired 100 workers, or about 5 percent of its work force and issued earnings warnings for the third and fourth quarters. It specifically cited a bookings slowdown in Hawaii among other areas for the cost-cutting moves. ResortQuest's stock fell 45.6 percent this week to $3.95.
Starwood Hotels & Resorts Worldwide Inc., which operates or markets 13 hotels in Hawaii, including some of the best known properties in Waikiki, lost ground each day and ended the week off 39.9 percent at $17.75.
Nevada-based Boyd Gaming Corp., which conducts travel packages from Hawaii to Las Vegas and has many shareholders in Hawaii, tumbled 38.9 percent to $3.56.
Hilton Hotels Corp., which owns the Hilton Hawaiian Village and operates other hotels in Hawaii, fell 35.2 percent to $7.25 even though it did manage to gain 55 cents yesterday.
Other companies of Hawaii interest that lost at least 20 percent for the week include:
Kona biotech firm Aquasearch Inc., which plummeted 36.6 percent to 17 cents despite reporting a narrower third-quarter loss and the launch of a national marketing campaign;
Biotech rival Cyanotech Corp., which dropped 23.1 percent to 50 cents and is in jeopardy of getting a delisting notice from the Nasdaq if it goes another 20 business days trading under $1 and;
Tesoro Petroleum Corp., whose stock lost 20.4 percent to $10.75 as fears of waning oil demand escalated.
At the end of June, 11 of the 14 members of the Bloomberg Honolulu Star-Bulletin Index were in positive territory for the year. The slowdown of the past three months, including this week's drubbing, has reduced that list to eight. They include Cheap Tickets (up 52.3 percent); City Bank parent CB Bancshares Corp. (up 40 percent); First Hawaiian Bank parent BancWest Corp. (up 33.2 percent); Schuler Homes Inc. (up 27.8 percent); Hawaiian Airlines; Bank of Hawaii parent Pacific Century Financial Corp. (up 19 percent); Central Pacific Bank parent CPB Inc. (up 6.3 percent); and Hawaiian Electric Industries Inc. (up 5 percent). Of the eight, only CPB and Hawaiian Electric's stocks are ahead of where they were at midyear.
