PZ99
( ͡° ͜ʖ ͡°)
- Joined
- 13 May 2015
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Thanks for that
Capital return and consolidation, now trading as QANDA
I'll take that as a comment.
cutting back planned flights on domestic routes in response to reduced demand from Australians worried about the economy and the upcoming election.
Well guess that's the end of the uptrend.
Don't ya hate it when you don't even get even half a day to get set!
How we worry :dunno::dunno::dunno:
Yeah that's it for me. No more interstate travel, there's an election on and I'm worried about the economy.
My thinking would be that any downturn in travel as a result of the election would be majority corporate. I'm not observing anyone I know delaying their holiday...I wonder if the election affecting travel is actually a real observed phenomenon (or a lame excuse).
They hid it well enough for me to miss it!The fact that QAN decided to hide the capacity reduction information in the back of a seemingly regular and innocent monthly statistics announcement... naughty naughty :nono:
I probably would have shorted CTD and yelled at it for not co-operating like FLT and CVO did all day!If I was only smart enough to short FLT and CVO at the open. :bad:
QAN's first downgrade in 2 years ends the momentum trade:
Following Mar-16 traffic, 3Q16 RASK looks like it declined at least 4%, a sharp drop from 2% growth achieved in 1H16. 2H16 capacity guidance has been revised lower in Domestic and International. Extrapolating this forward, we lower FY16 revenue forecasts by 1.6%, resulting in a -10% PBT impact, offset mildly by fuel changes (we were previously at 'worst case' FY16 guidance). At the revenue line, positive near-term revisions appear to be over, signaling the end of the QAN momentum trade, with the stock down ~11% as a result.
Downgrade is lower than headlines suggest, and fuel still remains a buffer:
Headline 3Q16 RASK growth was -4%, though Cricket World Cup (A$50mn), Mining (~$25mn) and Easter/school holiday timing all played a role, with the organic decline in 3Q RASK probably closer to ~2%. With competition still mild, downgrades look more attributable to broker exuberance and a dip in cyclical demand. Looking forward, we think some RASK decline will be offset by stronger 4Q16 capacity management and see scope for more fuel gains, with spot AUD Brent equating to a ~20% FY17 PBT buffer.
Forecast 12MF capital returns of A$1bn remain the real valuation story:
We continue to see QAN's FCF profile as defendable, distributable and excessively discounted. Our new forecasts, which incorporate the top of management's capex guidance range, still produce a FCF yield of 14.5%, which absent a sustained decline in operating conditions, should be largely distributable. We expect another buy-back to be announced at the August FY16 result, followed by a fully franked dividend thereafter, taking total 12MF capital returns to A$1bn and a yield of +13%.
Where could we be wrong?
Retail data doesn't point to a step shift down in consumer confidence, raising risks there is something more fundamental in the March data that we haven't appreciated. That said, Qantas is still an airline, demand is still cyclical and we are giving management the benefit of the doubt. We assume negative RASK growth continues into 2H16, but not 1H17. A more meaningful rout in FY17 demand is not in our expectations.
I probably would have shorted CTD and yelled at it for not co-operating like FLT and CVO did all day!
Morgan Stanley aren't fazed. Target price lowered from $5.40 to $5.15.
I ask that question myself all the time.Why aren't people jumping on it?
I ask that question myself all the time.The rising oil price, which equates to higher aviation fuel costs, broke the up trend. I don't believe price target guesses.
Nuh. They simply adjust the guess price down (or up) as the present realities unfold.I would assume they're not just guesses and all the smart estimators would've taken the oil price outlook into account in one way or another (which seems to fluctuate around the current price for the next year or so)
Looking for a turn!!
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