Qantas profits next year could be $1.3b………….and even more!
A report in The Sydney Morning Herald says that Qantas’ expectations of a surge in next year’s pretax profit to $1.3 billion could swell a further $100 million after analysts upgraded their earnings targets for the airline following the best result in its 87-year history.
The combination of growing traffic on the main airline and its low-cost sister operation Jetstar, and benefits from the $1 billion buyback of 10 per cent of its shares, will feed strongly through to the company’s earnings, resulting in a likely profit of $1.4 billion.
Analysts indicated that the group’s earnings could grow by as much as 37 per cent above the 2006-07 result of $1.03 billion – as opposed to the 30 per cent guidance provided by the chief executive, Geoff Dixon, and the finance director, Peter Gregg.
The impact would take net profit over the $1 billion mark and add huge sums to the $2.4 billion cash mountain Qantas will have despite the share buyback, which is due to start next month.
In a performance that strengthens the belief that the Airline Partners Australia private equity consortium would have been comfortably able to suck $4.5 billion out of Qantas, the company’s shareholders can expect another big dividend payout next year.
The Qantas board lifted the annual dividend to 30 cents a share on Thursday on the back of the latest result, and most market watchers expect the 2008 payment will rise by an extra 10 cents a share.
Taking account of the reduction in the number of Qantas shares through the buyback, such a dividend will translate into a $710 million cash return to investors who in May rejected APA’s $11 billion bid because of an anticipated uplift in the company’s fortunes in the coming years.
There was also a consensus among analysts that shareholders will gain from a strongly rising Qantas share price in the coming months, which will benefit from the capital return, the outlook for increased profits and a restructuring of the company that will occur in 2008 and beyond.
The brokers UBS, Merrill Lynch and JP Morgan vary in their expectations of where the price will be at the end of this year, although the respective targets of $6.70, $6.15 and $6.40 indicate a significant improvement on the private equity consortium’s offer of $5.45 a share.
The actual value of Qantas is likely to grow by between 90 cents and $1 a share from the split-up of the group into four main operating subsidiaries, of which three – aircraft leasing, freight and the frequent flyer program – could be floated on the stock exchange.
They are expected to be multibillion-dollar businesses in their own right.
Qantas shares were unchanged at $5.30 yesterday.
Report by The Mole
John Alwyn-Jones
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