OUTPERFORM from our recent hold. Our six-month price target is $6.00. -- Moon

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Date Posted: 06:03:06 04/16/10 Fri
Author: Buy 25th of May 2007
Subject: OUTPERFORM from our recent hold. Our six-month price target is $6.00.

Archived Share Suggestion for Friday 25 May Print This Page QANTAS AIRWAYS LIMITED (QAN)
BUY Opinion: Fasten your seatbelts

Fundamental Analysis
EVENT

Post APA bid failure, an investor briefing puts QAN in a better position.

KEY POINTS

Capital management capability confirmed.

Brokers upgrade recommendations and earnings forecasts

Potential de-merger of frequent flyer programme

COMMENTARY

During the hurly-burly of the Airline Partners Australia (APA) bib, Qantas upgraded earnings forecasts on two occasions. The national flag carrier has again made note of its increasingly rosy outlook.

The market has in recent days become more positive on the stock after CEO Geoff Dixon gave a bullish briefing, and flagged the likelihood of a capital return. This capital return is estimated at around $2 billion.

The briefing also flagged a potential de-merger of frequent flyer business. This is unlikely to occur for the next year.

More flights, more often

Another share price driver, domestic and international capacity growth, is expected in over the next financial year as the airline proves it has the flexibility to manage capacity.

The introduction of new aircraft (A380s, B787s) has been projected to help lower unit costs by 15-20%. The market forecasts a 5% growth in unit revenue due to the above improvements.

They want it, we want it

Although forecasts will need to be reviewed further, the failed bid has proved to the market the value inherent in the airline.

QAN is in our good books and we have upgraded to an OUTPERFORM from our recent hold. Our six-month price target is $6.00.

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