Qantas shares in the stratosphere
The Daily Telegraph says that soaring Qantas share price continue to make a mockery of the failed $11.1 billion takeover bid, gaining almost 4% per cent to near double its price of a year ago.
The rise came as stock analysts upgraded the airline’s outlook after hearing a positive Qantas management talk up a possible capital return to shareholders and spin-offs of its freight and frequent-flyer divisions.
Qantas touched an all-time high of $5.68 in morning trading, before closing a stellar week at $5.66.
Since the market opened last Monday morning, Qantas shares have jumped a massive 44c on a week when its price was widely tipped to crumble.
Its peak was 4.2% above the $5.45 a share offered under the Airline Partners Australia bid, defying the gloomy predictions echoed by Qantas management and the private equity consortium if the bid failed.
The strong rise was motivated by CEO Geoff Dixon’s hints on Thursday that shareholders could expect Qantas to more aggressively use its relatively undergeared balance sheet to fund capital returns.
There are also expectations the airline’s frequent-flyer program, freight division, or both, will be spun off in the next 12 months.
One analyst told The Saturday Daily Telegraph yesterday the turnaround from doom and gloom to absolute positivity was comical.
“How they thought this thing was worth $5.45 a share is laughable and the Qantas shareholders have every reason to be mystified.”
“It was interesting to see the senior management back talking up the prospects of the business and talking down the competitive threat.” “You didn’t see that during the bid process.”
Credit Suisse analysts Anthony Moulder and Mark Roberts were two of many analysts to upgrade their Qantas share price targets – to $6.32 from $5.45 – and adjusted the rating to “outperform” from “neutral”.
“We see the demand profile for Qantas, coupled with the shortage of capacity growth, as supporting increased levels of profitability for the next 12 months,” the analysts wrote in their research.
UBS analysts Angela Frino and Simon Mitchell maintained a $5.90 share price valuation and “buy 2” recommendation on Qantas.
JP Morgan analyst Matthew Crowe increased his stock valuation to $5.74 from $5.53, with an upgraded December share price target of $6.02.
Separating the freight and frequent-flyer divisions could add another $1 to the share price, Mr Crowe said.
Deutsche Bank’s Jason Bloom was less optimistic, giving a target price of $5.05 and a hold recommendation because of expanding aviation capacity.
Report by The Mole
John Alwyn-Jones
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