image description
17 May 2021 | Buy

BUY | Qantas Airways Limited


Highly competitive on the other side of the pandemic

Qantas Airways Limited (ASX:QAN)

Qantas shares have retraced around $1 per share over the last 4-5 weeks and we see strong tailwinds for growth and profitability emerging for this business over the coming few years. At current prices, Qantas trades at a discount to valuations of $5.50 – $6.

The business is well capitalised, and both domestic and corporate capacity is returning faster than expected as Australia emerges in the post-COVID-19 environment.

While competitors have been forced to dramatically reduce capacity and close travel routes for their business – Virgin being the best example – Qantas has added 34 additional domestic routes and is utilising part of its grounded international fleet to meet this increased domestic capacity.

Throughout the COVID-19 lockdowns, Qantas has been able to execute some significant cost reductions across the business which would not be possible in a normal operating environment. As travellers increasingly return to domestic travel, and international travel opens up later this year, we expect the business could generate revenues that could exceed pre-COVID-19 levels faster than expected with higher margins. If our thesis plays out as forecast, we should expect excellent capital growth from our entry price and a quick return to the payment of fully franked dividends.



General Disclaimer
This article has been prepared for the general information of investors and not having regard to any particular person’s financial situation, objectives, or needs. Accordingly, in so far as any information may constitute advice (whether express or implied), it is general advice and no recipient should rely upon it without having obtained specific advice from their advisor at Baker Young Limited. Baker Young Limited makes no representation, gives no warranty, and does not accept any responsibility for the accuracy or completeness of any recommendation, information, or advice contained herein. To the extent permitted by law, Baker Young Limited will not be liable to the recipient or any other persons in contract, in tort or otherwise for any loss or damage (including indirect or consequential loss) as a result of the recipient, or any other person acting or refraining from acting in reliance on any recommendation, information or advice herein. Baker Young Limited or persons associated with it may have an interest in the securities or financial products mentioned in this document and may earn brokerage and other fees as a result of transactions in any such securities. Australian Financial Services Number 246735.