Qantas (QAN) Shares

Submitted by Craig Strzelecki on 18 September, 2007 - 12:37

Qantas (QAN) has a share price target of $6.70 per share from Australian sharemarket analyst UBS. Qantas July unit revenue up 12%, 14% rise in July revenue on only 2% growth in capacity: Qantas' July traffic numbers reveal an estimated 14% rise in passenger revenue (constant currency) on just 2% growth in capacity. The resulting 12% rise in unit revenue (RASK) was made up of a 3%pt expansion in loads and 9% growth in yield. This sets a new monthly record for unit revenue expansion in the current cycle. FY07 averaged 10% growth. Domestic saw a big jump, International continues to moderate: Domestic was the positive surprise with 13% growth in RASK, well ahead of the 5% average trend we saw in 2H07. This partly reflects a weak comparable July-September period in the domestic business in FY07. The domestic mainline operation is now running with 12-month trailing loads of 80%. International continues its trend of moderation, growing unit revenue by 10%, which is down from the highs of 13% seen at the beginning of 2007. FY08 forecasts rely on 5% unit revenue growth for the full year: The analysts are currently forecasting 5% growth in unit revenue in FY08, which results in our 37% growth in FY08 pre-tax profit compared to management's guidance of "around 30%" growth. They expect very strong 1H revenue performance from Qantas, but our full year forecasts reflects a return to capacity growth (by Qantas and the industry) towards the end of 2007, which will make 2H growth difficult. Their $5.90 valuation of the Australian airline is based on 11x FY08E EPS and our A$6.70 price target reflects half their assessed benefit from Qantas' strategic restructuring plans.

Qantas Airways Limited is listed on the Australian Stock Exchange (ASX) under stock code QAN. You can view their investor website here. QAN was listed on the ASX on 31 July, 1995. Margaret Jackson is the chairperson for Qantas and Geoff Dixon is the CEO. The company is involved in the operation of international and domestic air transportation services, the sale of worldwide and domestic holiday tours and associated support activities including catering, information technology, ground handling and engineering and maintenance. They also also operate subsidiary businesses including other airlines, and businesses in specialist markets such as Qantas Holidays and Qantas Flight Catering. Find out the meaning of the recommendations in this primer. Browse for other stockbroker recommendations. You can use Instalment Warrants to trade QAN. Read last months news about Qantas and Linfox. Read previous stock recommendations for Qantas (QAN).