Contributing Members
Content is delayed by one month. Upgrade your membership to unlock all content. Click for membership options.
Valuation of $9.07
stale
Added 8 months ago

QANTAS currently trades on a 7x FY23e NPAT.

This valuation assumes an increase to a 10x FY23e NPAT, as the market recognizes a structurally higher profit pool available post-COVID.

b8738ad35dbc09729329265d90e713884576e6.png

A potential risk is Albanese Government aviation reforms following the release of the Aviation White Paper.

Circa 45% upside available assuming the above thesis holds.

Read More
#Selling
stale
Added 7 months ago

I had seen this as an opportunistic purchase ahead of a bumper profit and continued strength in the margin. I still like the value in the business (7x LTM PE) but given the increased politicization of the company, I am cautious of a near-term re-rate. 

Read More
#Business Update
stale
Added 4 years ago

05-May-2020:  Qantas Group Market Update

Weren't QAN a screaming buy below $2.50 in March!!  By the time I'd convinced myself they were a buy, they were already back over $3 and heading north again.  They closed at $2.14 back on March 19th.  They are back over $3.60 today and still heading north.  Fortunately, I didn't miss out entirely, as I was distracted at the time buying other bargains such as BPT at below $1 and NWH at around $1.10.

Read More
#Bull Case
stale
Last edited 3 years ago

Qantas International was never hugely profitable, and relied upon rusted on frequent flyers held by platinum handcuffs (of which I am one) to keep it afloat.

Qantas domestic, however was hugely profitable pre-COVID, and at least before the Sydney lockdown, with domestic flying capacity at 90% for Qantas and 110% for Jetstar, the result was always going to be better than the market was pricing in. 

With a pre-COVID valuation of approx 10x EPS for FY19, all the bad financial news out, Government now talking about financial assistance, a decent financial buffer, and the domestic competition on the floor, the market is currently pricing Qantas down on sentiment.

It's definitely not long term, but it's an easy trade with little downside, and plenty of upside once domestic borders open up without much restriction, and international demand stays low for some time to come.

Read More
#Bull Case
stale
Last edited 3 years ago

Further to my previous straw, it's becoming apparent that the market sentiment on Qantas is clearly overshooting the mark. The pre-COVID price was all about anticipated growth in Qantas International, not the boring backwater engine room of domestic. 

For FY19, EBIT for International was 25% of EBIT, with domestic + Jetstar + loyalty making up the rest. FY19 was lower margin due to high fuel costs. The latter three divisions were going gangbusters before the most recent lock downs, and will no doubt pick up once demand starts again for domestic with vaccine passports (government supported or at the insistence of Qantas).

When borders open up again, with the requirement to quarantine either at home or in special accomodation will temper demand, low cost leisure (i.e. Jetstar International) and low margin budget economy fares will be non-existent. So the money will be spent by higher margin business travellers who will no doubt be lured into spending with Qantas by double and likely triple status credit offers for fully flex business fares, rather than going with the competition.

Would any serious business traveller trust Emirates, Qatar, Etihad, Singapore, United or American, to get you home in the current environment? I wouldn't.

I think it's worth somewhere between $5.50-$6.50 on current metrics. Definitely not high reward, but it's still an easy trade with little downside risk.

Read More
#Bull Case
stale
Added 3 years ago

Following up on my previous straws, the time to exit this trade will be when optimism about international travel from Australia in the near term is high.

Mr Strawman is fond of the saying that the market is a voting machine, and in this instance, the Qantas share price will definitely go the way of expectations.

I'll look to exit the position on SM at around $6-$6.50. My guess will be around November when there is plenty of noise from AJ about flying internationally again, even though domestic is where the money is made.

Shame I didn't trade it with real shares due to opportunity cost, but the thesis remains.

Read More
#Bull Case
stale
Last edited 2 years ago

I'm still bullish on Qantas medium term.

Reasoning:

1) Domestic travel is now largely unhindered, with WA rejoining the federation in the next few days, and domestic was where the profits were earned.

2) Qantas have no real competition for the profitable business dollar. Virgin are a shadow of their former selves, Rex and Bonza are not preferred where time is money (believe me, I have been burned too many times by a stingy employer), and whilst remote working has taken off, remote working cannot replace everything.

3) International will take a while to come back online, but when it does, knowing that you'll be able to rely on an airline to get home will carry a nice hefty premium that many will be happy to pay. I know I would.

4) Project Sunrise (direct long haul from east coast to UK/Europe and east Coast of USA) is going ahead, which minimises transit stops, which are likely to be highly desirable in COVID era travel, which will also come with a nice premium.

5) Qantas know that they need to keep those with golden and platinum handcuuffs tied to the airline (I'm one who is trapped). As of today, Qantas had announced yet another status extension, but have started to wean us off the idea of status extensions by structuring requalification to reward those who are actually flying. Smart move on their part - status extensions are low cost and keep your highest value customers from deciding to try a competitor.

Ultimately, I think Qantas are in the box seat with pricing power, and the low margin leisure traveller dollar won't be where their profits in the next few years lie. Investing in an airline being profitable? Strange times indeed.

Read More
#ACCC doesn't like buyout
stale
Added 2 years ago

3791c7a56d03c532a87e5f9394b74abd7fd0b8.png

Read More
#Sell signals
stale
Added one year ago

For those who are still following Qantas, you might have seen in your emails recently that Qantas are starting to ramp up promotion on sale fares, both domestic and overseas.

Admittedly, its all for low season, and having done recent searches for overseas flights at peak times, they are still pricing peak fares at well above their competitors (50% higher to Europe in the Southern Autumn/Spring).

Profitability (or rather inverse losses), is likely to return to normal over the next two years, so if you are still on board, I think it's time to sell.

Read More
Valuation of $6.00
stale
Added one year ago

Time to prepare to exit the trade.

With a now COVID-normal domestic flying pattern above pre-COVID demand with no substnatial competition from Virgin or Rex, Qantas are now profitable. QF international is also profitable due to sky high demand, which we should see settling down over the next 12-24 months.

It's taken longer than I thought it would with the 2021 lockdowns, but now I'm aiming to exit this trade at around $6.00. We're not far off that with AJ's announcment on 13/10 to expect a bumper profit.

It will probably still go higher after that, but history never repeats, it only rhymes. Airlines remain a terrible long term investment.

Read More
Valuation of $5.27
stale
Added 3 years ago
First bit below is old (12 months old as I type this) - scroll down for latest updates. 27-March-2020: Upside from here for the patient. Regarded as our "National Airline" and will not be allowed to fail. If required, the Australian Federal Government will support them. However, the statement that QAN put out on Wednesday is reassuring with regard to their substantial debt and their ability to service it. They still have planes that they own that are NOT secured against any lending facilities, which gives them even more funding options, should they require them. Airlines do NOT make good long-term investments generally speaking. They are capital-intensive, and don't usually provide good returns for investors over the full cycle. However, they can be good trades if bought and sold at the right times. Warren Buffett's Berkshire Hathaway now has substantial positions in the USA's four main airlines, even though he said for years that airlines were terrible investments and that if somebody had shot down the Wright brothers during their first flight, it would have been doing a great service to all investors. Times change. People change their minds. Sometimes airlines DO make great short-to-mid-term investments. This might just be one of those times. 25-Sep-2020: Update: Warren Buffett has sold all of his US Airlines shares, just before they bounced as it happens, so perhaps he's changed his mind again. $5.27 still seems like a fair price for QAN, not to pay, but to sell, as in, buy lower (under $4) and sell when they get to $5.27. 26-March-2021: Update: No change to my top end price target of $5.27. I wouldn't be buying them up here. Wish I'd followed my own advice from 6 months ago (paragraph above) - because QAN got up to $5.27 - and then a little more - twice - since then, but I only traded QAN for a short period between March and June 2020, and that's about it. I made money, but not as much as I'd have made if I'd held them and sold at $5.27. Guess I'll have to take my own advice next time they drop below $4/share.
Read More