Australian stock report - Qantas

AUSTR

Qantas Airways decreases as investors eye AGM October 20, 2017 16:00 AEST

NEWS BITES - AUSTRALIA

Qantas Airways Limited (ASX:QAN), Australia's 3rd largest Transportation company by market cap, has decreased 1.0c (0.2%) from its last trading session of October 19 to close at $A6.39. Compared with the All Ordinaries Index which rose 8.8 points (0.1%) in the day, the relative price change was -0.3%. The volume was 0.7 times the average daily trading volume of 8.4 million shares.

BUYBACK OF SHARES

Qantas Airways announced a buyback of 1,040,800 shares worth $A6,598,672 (or $US5,175,338) on October 17. The buyback price was $A6.34.

UPCOMING EVENT: AGM

The annual general meeting (AGM) will be held on Friday, October 27.

Highlights in today's Report:

SECTION 1 BEARISH SIGNALS

Fundamentals, Overvaluation [compared with sector average], Technicals, Short Selling, Low Performance Indicator

SECTION 2 BULLISH SIGNALS

Fundamentals, Undervaluation [compared with sector average], Technicals, High Performance Indicators

SECTION 3 PRICE VOLUME DYNAMICS

Momentum, Moving Annual Return, Turnover Rate & Turnover Period

SECTION 4 RANKING

Global, Independent Ratings

SECTION 5 FINANCIALS

Financials Summary, Annual Report for the year ended June 30, 2017 (year-on-year comparisons with previous corresponding period)-, Trailing 12 Months Dividends

SECTION 6 PROFILE

Activities, Industry & Sector, Top Management, Issued Capital

SECTION 7 REPORTED BUYING AND SELLING

SECTION 8 STOCK BUZZ

SECTION 1 QANTAS AIRWAYS BEARISH SIGNALS

1.1 Fundamentals:

+ The relative yield of the stock, defined by its yield of 2.2%, divided by average yield of dividend yielding stocks in the All Ordinaries Index of 4.2% is 52.0%. This suggests the stock is overvalued in dividend yield terms.

+ Net profit margin has averaged 5.1% in the last 3 years. This is lower than the sector average of 7.4% and suggests a low margin of safety.

1.2 Overvaluation [compared with sector average]:

+ Dividend yield of 2.2% [3.8%].

1.3 Technicals:

Overbought/Bearish/Resistance Signals:

+ The Relative Strength Index (RSI) of 82.4 has penetrated the overbought line of 70, suggesting the price gain of 8.1% in the last 14 days is unusually high.

+ The Stochastic indicator of 86.4 has broken through the overbought line of 80; this indicates the price is close to its 14-day high and is likely to revert to a downtrend.

1.4 Short Selling:

+ In the Australian Short Selling market of 1079 stocks, short selling (on ASX and CHI-X) as a % of issued shares ranked 85th and within the top quartile of stocks. This means it was higher than market average of 0.05%, a bearish indicator.

1.5 Low Performance Indicator:

DescriptionValueRank In Market
Total Debt to Equity1.4In Bottom 9%

SECTION 2 QANTAS AIRWAYS BULLISH SIGNALS

2.1 Fundamentals:

+ Tobin's Q Ratio, defined as MCap divided by Total Assets, is 0.7. Compared with the rest of the market the stock is undervalued.

+ Total Liabilities/EBITDA of 4.9 is less than the Joseph Piotroski benchmark of 5.

+ Interest cover defined by EBIT/I is 6 times. This indicates it is less leveraged.

+ As per the Du Pont analysis, Return on Equity is high at 31.6%. This is computed as net profit margin of 6.4% times asset turnover [sales/assets] of 0.97 times leverage factor [total assets/shareholders' equity] of 5.1. Also, this has improved from 16.4% last year.

Du Pont AnalysisROEProfit MarginAsset TurnoverEquity Multiplier
Current Year31.66.40.975.1
Previous Year16.43.50.95.1

2.2 Undervaluation [compared with sector average]:

+ Price/Earnings of 13.9 [46.4]. We estimate Qantas Airways stock is trading at a current year P/E of 10.1 and a forward year P/E of 7.5.

+ Price/Sales of 0.7 [2.2]. We estimate Qantas Airways stock is trading at a current year Price/Sales of 0.7 and a forward year Price/Sales of 0.7.

+ Return on Equity 24.1% [6.8%].

+ Return on Assets 5% [2.0%].

+ Return on Capital Employed 14% [5.2%].

2.3 Technicals:

+ The 2.1% discount to 12-month high of $A6.53 against the 146.9% premium to 12-month low of $A2.59 suggests the stock continues to push for new highs.

+ In the last three months the stock has hit a new 52-week high twelve times, pointing to a significant uptrend.

+ A two-bagger in the past year, the present value of $A1,000 (PV1000) invested one year ago in Qantas Airways is $A2,087, comprising a capital gain of $A1,022 and dividend reinvested of $A65.

PV$10001-week1-month1-year
QAN.ASX1,0131,0852,087
All Ordinaries Index1,0141,0391,080

+ The present value of AUD1,000 (PV1000) invested twenty years ago in Qantas Airways is $A4,218, including a capital gain of $A1,943 and dividend reinvested of $A1,275.

+ 20 years Multiplier in AUD = 4.218x

+ Compound Annual Growth Rate (CAGR) in AUD = 7.5%

Present Value of USD1,000 invested 20 years ago:

+ The present value of USD1,000 (PV1000) invested twenty years ago in Qantas Airways is $US4,519, including a capital gain of $US2,153 and dividend reinvested of $US1,366.

+ 20 years ago AUD 1 equalled USD 0.7345

+ 20 years Multiplier in USD = 4.519x

+ Compound Annual Growth Rate (CAGR) in USD = 7.8%

Oct 20, 2017: AUD 1 equals USD 0.79

2.4 High Performance Indicators:

DescriptionValueRank In Market
Today's Turnover$A37.2 millionIn Top 2%
Price/MAP2001.34In Top 7%
Price/MAP501.09In Top 8%
Price to Sales0.7In Top Quartile

SECTION 3 PRICE VOLUME DYNAMICS

3.1 Momentum:

+ Volume: there were 5,818,312 shares worth $A37.2 million traded today. In the past week, volume was 0.9 times average and the shares were up 1.3%.

3.2 Moving Annual Return

Based on a dynamic start date of 5 years ago, the Moving Annual Return has been positive in 3 of the last 5 years. An investment a year ago in QAN would have produced a return of 106.7%.

QANClose (AUD)Dividends (AUD)Capital Gain / (Loss) %% YieldAnnual Return %
Oct 206.390.14102.24.4106.7
1 Yr ago3.160.07(19.4)1.8(17.7)
2 Yrs ago3.92-191.3-191.3
3 Yrs ago1.35-(6.5)-(6.5)
4 Yrs ago1.44-6.3-6.3

Close 5 years ago $A1.35

3.3 Turnover Rate & Turnover Period:

+ The turnover rate in the 12 months to date was 83.4% (or a turnover period of 1 year 2 months). This average length of ownership of the stock at 0.7 times the average holding period of 1 year 8 months for stocks in the All Ordinaries Index suggests a slightly larger number of speculators on the share register, making it less safe for long-term investors.

SECTION 4 RANKING

4.1 Global Rank [out of 47,820 stocks] and Rank in the Asia Pacific Region [out of 2,051 stocks]

DescriptionValueGlobal RankIn APAC Region
MCap (US$)9B1,62632
Total Assets (US$)13.6B2,21230
Revenue (US$)12.6B1,08114
Net Profit (US$)670.4M1,38023
Return on Equity %24.12,833131
Net Profit Margin %5.317,239539
Price to Book4.626,2331,186
Price/Earnings13.98,319306
Yield %2.211,002506
PV$1000 (1Year) US$*2,1432,240119
US$* Change (1Year) %110.52,355128

* 1 year ago AUD 1 = USD 0.77

Oct 20, 2017: AUD 1 equals USD 0.79

4.2 Independent Ratings

Qantas Airways Limited was ranked 9 in World Airline Awards list of Top 100 Airlines Companies in 2016; an improvement over a year from rank 10 in 2015.

It is the 707th largest by revenue in the Forbes Global 2000.

It is placed 101/1307 in BSS News Bites' ranking of Australian performers in the past year, a percentile ranking of 92.

SECTION 5 QANTAS AIRWAYS FINANCIALS

5.1 Financials Summary

Year endedJun 2017Jun 2016Jun 2015
Sales (USD B)12.712.812.5
Pretax (USD)930.7M1.1B621.8M
Net (USD M)671.5811439
EPS (AUD)0.460.4940.25

Net profit was down 17.2% from US$811 million in 2016 to US$671.5 million in 2017. Earnings Per Share (EPS) was down 6.9% from 49.40c to 46.0c.

5.2 Annual Report for the year ended June 30, 2017 (year-on-year comparisons with previous corresponding period)-

Favourable Changes:

+ Interest expenses to Sales down from 1.8% to 1.5%.

+ Debt to Equity down 8.1% from 1.5 to 1.4.

+ Total non-current assets to Total Assets up from 79.3% to 81.9%.

+ Total Liabilities to EBITDA of 4.9 compares favourably with the Joseph Piotroski benchmark of <5. However, it has deteriorated by 6.5% from the previous year's ratio of 4.6.

Unfavourable Changes:

+ Net profit down 17.2% from $A1.0b ($US764.7m) to $A852.0m ($US653.9m)

+ EBIT Margin down from 10.5% to 8.8%.

+ EBIT to total assets down from 10.2% to 8.2%.

+ Total revenue to total assets down from 1.0 to 0.9.

+ Profit before tax to Sales down from 8.8% to 7.4%.

+ Current ratio down 10.2% from 0.5 to 0.4.

+ Total current assets to Total Assets down from 20.7% to 18.1%.

+ Current Debtors to Total Assets down from 4.8% to 4.6%.

+ Total Liabilities to Operating Cash Flow of 5.1 compares unfavourably with the Joseph Piotroski benchmark of <4. This ratio has deteriorated by 6.1% from the previous year's ratio of 4.8.

Note:

+ EPS steady at 46.0c (US35.3c).

+ Interest cover steady at 6.0.

+ Cost of Goods Sold to Sales up from 64.6% to 65.4%.

+ Depreciation to Sales up from 7.6% to 8.6%.

+ Tax expenses to Sales down from 2.4% to 2%.

+ Total liabilities to Total assets steady at 0.8.

+ Fixed Assets to Total Assets up from 69.9% to 71.2%.

+ Intangibles to Total Assets up from 5.4% to 6%.

5.3 Trailing 12 Months Dividends

Trailing 12 Months ToValue (c)
20 Oct 201714
20 Oct 20167

SECTION 6 QANTAS AIRWAYS PROFILE

6.1 Activities

Qantas Airways Limited provides transportation of passengers through two airlines including Qantas (full service carrier) and Jetstar (low cost carrier), operating international, domestic and regional services. The Company also includes Qantas Frequent Flyer and Qantas Freight which generates diverse revenue streams and adds value for customers and investors.

6.2 Industry & Sector

Classification LevelName of Sector
Economic SectorIndustrials
Business SectorTransportation
IndustryPassenger Transportation, Ground & Sea

6.3 Top Management

The chairman is Leigh Clifford and the chief executive officer is Alan Joyce.

6.4 Issued Capital

Based on 1,793,703,899 issued shares the market capitalisation is $A11.5 billion.

SECTION 7 REPORTED BUYING AND SELLING

Insider Buying and Selling

Reported Buying:

August 10: Qantas Airways substantial shareholder buys

Qantas Airways (ASX:QAN) substantial shareholder BlackRock Group bought 21,055,438 shares worth $A120,015,997 ($US94,572,605) on August 04, increasing 22.3% from 94,572,395 shares to 115,627,833 shares. The purchase price was $A5.70.

Reported Selling:

September 11: Qantas Airways substantial shareholder sells

Qantas Airways (ASX:QAN) substantial shareholder UBS Securities Australia Ltd sold 18,079 shares worth $A103,231 ($US83,111) on September 06. The selling price was $A5.71.

September 11: Qantas Airways substantial shareholder sells

Qantas Airways (ASX:QAN) substantial shareholder UBS Securities Australia Ltd sold 828 shares worth $A4,728 ($US3,806) on September 06. The selling price was $A5.71.

September 11: Qantas Airways substantial shareholder sells

Qantas Airways (ASX:QAN) substantial shareholder UBS Securities Australia Ltd sold 1,675 shares worth $A9,564 ($US7,700) on September 06. The selling price was $A5.71.

September 11: Qantas Airways substantial shareholder sells

Qantas Airways (ASX:QAN) substantial shareholder UBS Securities Australia Ltd sold 26,465 shares worth $A151,115 ($US121,663) on September 06. The selling price was $A5.71.

SECTION 8 STOCK BUZZ

Corporate Wire

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October 18: Qantas Airways buys back 1,040,800 shares

Qantas Airways (QAN.AU) announced a buyback of 1,040,800 shares worth $A6,598,672 (or $US5,175,338) on October 17, 2017. The buyback price was $A6.34.

October 16: Qantas Airways buys back 447,092 shares

Qantas Airways (QAN.AU) announced a buyback of 447,092 shares worth $A2,812,209 (or $US2,216,302) on October 13, 2017. The buyback price was $A6.29.

October 13: Qantas Airways buys back 905,976 shares

Qantas Airways (QAN.AU) announced a buyback of 905,976 shares worth $A5,684,999 (or $US4,480,348) on October 12, 2017. The buyback price was $A6.28.

October 12: Qantas Airways buys back 706,025 shares

Qantas Airways (QAN.AU) announced a buyback of 706,025 shares worth $A4,386,180 (or $US3,456,749) on October 11, 2017. The buyback price was $A6.21.

October 11: Qantas Airways buys back 1,282,208 shares

Qantas Airways (QAN.AU) announced a buyback of 1,282,208 shares worth $A7,949,690 (or $US6,190,423) on October 10, 2017. The buyback price was $A6.20.

Contact: +61 2 9691 3636

Physical Address: Level 8, 241 O'Riordan Street, Mascot, NSW, Australia, 2020

State/Province/Country: Australia

Exchange: Australian Securities Exchange

ISIN: AU000000QAN2

AU:QAN; ASX:QAN; AX:QAN; QAN.AX

PermID: 4295858622

Qantas Airways Limited, Qantas Airways Ltd

Source: www.BuySellSignals.com