Qantas

Here is an update on the different sectors of Australian market from market analyst Macquarie Research Equities.

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Qantas has an Outperform recommendation and a 12 month share price target of $5.45 from Australian stock analyst Macquarie Research Equities.

QAN: “QANTAS” Vs “V Australia”

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 (QAN) have a Buy 2 broker call and a share price target of $6.50 from Australian Stock Exchange analyst UBS. Digging into Capacity Growth and Updating Price Target: their prior A$5.90 price target was based solely on our 12x FY08E EPS valuation, and did not include anything for our A$1.10 in extra value from frequent flyer demerger and A$2bn in capital management as published on 22 May. They no longer see management reluctance as an impediment and are raising our target to A$6.50 to reflect half of the benefit. Clear catalysts to come: Apart from ongoing traffic momentum, we expect an announcement as to capital management at the August result, and more detail on the frequent flyer demerger towards the end of this year. Tiger's entry remains the only visible negative event this year. International capacity growth needs to be watched: They were surprised at management's expectation for its international capacity to grow by 3% in FY08, 10% in FY09, and 13% in FY10; reflecting the deferral of aircraft retirements. They expect similar growth from Qantas' rivals highlighting the finite nature of the current supply demand balance and our flat pricing outlook from FY09 onwards. The analysts' A$5.90 valuation is based on 12x our FY08 EPS forecast, which is in the middle of the current trading range of Qantas Airways' peers. Their A$6.50 price target incorporates an additional 60c for the frequent flyer demerger and capital management.