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Will Qantas Airways Ltd recover and grow further?

Team Veye | 27 Nov 2018 ASX - QAN, QAN
Will Qantas Airways Ltd recover and grow further?

Qantas Airways Ltd (ASX: QAN)

On 25th Oct’18, the company released the group trading update for the first Quarter FY19 highlighting that the group total revenue was up 6.3% to $4.41 billion versus prior corresponding period. The company highlighted that the rising fuel costs were substantially offset by net passenger revenue growth and capacity discipline. The value of forward bookings was up 8% on flat capacity compared with same time last year. And the company also announced a multi-million dollar investment in a new First Lounge and expansion of its existing Business Lounge at Singapore Changi Airport. Combined, this will increase the airline’s lounge capacity at Changi by 60% when complete in late calendar 2019. The upgrade reflected increased demand for premium travel and the importance of the Singapore hub to the Group’s broader network.

The company had released its FY2018 results on 23rd Aug’18 delivering a very strong performance across key metrics. The key highlights were:

  • Underlying Profit Before Tax: $1.6 billion (up 14%)
  • Statutory Profit Before Tax: $1.4 billion (up 18%)
  • Statutory Earnings Per Share: 56c (up 21%)
  • Return On Invested Capital: 22%
  • Net free cash flow: $1,442 million (up 10%)
  • Extension of global lounge improvement program –– six additional ports to be upgraded
  • Commitment to create a second pilot academy facility in regional Australia. (Data Source – Company Reports)

 

Veye’s Take

The stock price of the company after touching an all-time high of $6.83 on 21st Aug’18 slipped 23% until 26th Oct’18 post which it has started recovering. The company has already managed offset rising fuel costs during Q1 FY2019 by net passenger revenue growth and capacity discipline as per its strategy and is well placed with expected healthy consumer demand growth consistent with an improved global outlook.  We maintain a “Hold” on “Qantas Airways Ltd” at the current price of $5.89

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