As a result, we are looking to buy QAN on a dip down to $5.70. -- Moon

[ Show ]

Support VoyForums

[ Shrink ]

VoyForums Announcement: Programming and providing support for this service has been a labor of love since 1997. We are one of the few services online who values our users' privacy, and have never sold your information. We have even fought hard to defend your privacy in legal cases; however, we've done it with almost no financial support -- paying out of pocket to continue providing the service. Due to the issues imposed on us by advertisers, we also stopped hosting most ads on the forums many years ago. We hope you appreciate our efforts.

Show your support by donating any amount. (Note: We are still technically a for-profit company, so your contribution is not tax-deductible.) PayPal Acct: Feedback:

Donate to VoyForums (PayPal):

[ Login ] [ Contact Forum Admin ] [ Main index ] [ Post a new message ] [ Search | Check update time ]

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Date Posted: 05:46:51 04/16/10 Fri
Author: 16th of October 2007===BUY
Subject: As a result, we are looking to buy QAN on a dip down to $5.70.

for Tuesday 16 October Print This Page QANTAS AIRWAYS LIMITED (QAN)
Last Price Change +/- Risk Level
BUY Flying High $ 2.98 +$0.020 CORE

Event
Qantas increases its fuel hedging as crude oil prices continue to surge.

Key Points
Hedging changes for crude oil.

Dreamliner delay.

Strong passenger figures and currency risk.

Fundamental Analysis
Qantas Airways Limited (QAN) is one of the world's leading airlines. On top of its standard domestic and international flights, QAN also owns budget airline Jetstar, regional airline QantasLink and related travel businesses Qantas Holidays and Qantas Flight Catering.

A Well-Oiled Company

As crude oil prices continue to accelerate to record highs, many crude-reliant industries will be hard hit. Airlines chew through millions of litres of fuel, so it is vital for Qantas to hedge its exposure to oil prices.

QAN has hedged 68% of its crude oil requirements for the remainder of 2007/08 at a worst case rate of just under US$73 a barrel. QAN mostly operates on an option hedging basis, rather than locking in prices. This means that QAN can still benefit from oil prices falling below US$73.

The rising Aussie dollar is good news for Qantas’ profits and is countering the climb in oil prices. The airline earns most of its revenue in AUD but pays a lot of costs (especially fuel) in USD.

A Dream Delayed

QAN is one of many airlines that had an order in for the new Boeing 787 Dreamliners. Unfortunately, Boeing announced a delay in the delivery of the aircraft by around six months, which came as a huge disappointment for the aircraft industry already waiting longer than planned for Airbus’s mammoth A380 jumbo jets.

The good news is that QAN does not expect the delay to impact operations significantly as it already had contingency plans in place for any short-term capacity shortages. The delays may even boost QAN’s profits as constant capacity drives growing passenger demand and yields.

In any case, the Dreamliners are expected to be up and running no later than 2009.

Money and Passengers Soaring

QAN shares rocketed to a record high on 16 October after the company announced an 8.8% rise in passenger numbers from last year. Its discount airline Jetstar was also a star performer, with more and more passengers warming to the budget airline. Passenger numbers on Jetsar grew by 21% in the past.

Overall, QAN has been going from strength to strength since the failed private equity takeover.

Key Data - Ratios (Guide)
Sector Transportation
Weight in Sector 19.60% Market Cap $ $6.8 b
Year Hi/Low $3.06 - $1.74 Next Report August
Dividend Months Sep 10 Apr 11 Apr 11 Ex-Dividend Date N/A
1 Yr Return + 2.53% 1 Yr Return vs Market + 2.17%
Net Tangible Assets (NTA) $3.18 Price/NTA 0.94
Return on Assets (ROA) 14% Return on Equity (ROE) 17%

Forecast Numbers Current 1 Yr(exp) 2 yrs(exp)
Net Profit After Tax (NPAT) $969.0 m $326.0 m $516.5 m
NPAT Margin 6% 2% 3%
Earnings Per Share (EPS) $0.50 $0.17 $0.28
Price/Earnings Per Share (P/E) 6.0 17.5 10.6
Operating Cashflow $2.7 b $2.5 b $2.1 b
Operating Cashflow Per Share $ 1.19 $ 1.11 $ 0.93
Price/Operating Cashflow Per Share 2.5 2.7 3.2
Earnings Yield 16.78% 5.70% 9.40%
Dividend Yield 11.74% 3.36% 6.38%
Franking Credit Level 0% 100% 100%

Technical Analysis

Investors faced some turbulence during the first decade of QAN’s trading history, but the airline’s performance since July last year has been truly impressive.

In just over a year, the national carrier has surged from $2.83 to hit its all-time high of $6 yesterday.

The mid-August correction saw QAN drop temporarily below the $5 mark again, where QAN successfully managed to turn previous resistance level into support (as illustrated on chart).

QAN has rallied around a dollar per share over the past couple month, which has sent the Stochastic Oscillator to an overbought zone. This means QAN may have a minor pullback in store.

As a result, we are looking to buy QAN on a dip down to $5.70. We would place stops at $4.90, which is below the August low. We are targeting a move up to $6.50, followed by $7.30.

[ Next Thread | Previous Thread | Next Message | Previous Message ]

Replies:

Net Tangible Assets (NTA) $3.18 (NT) -- 16th of October 2007, 05:48:24 04/16/10 Fri