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Qantas Airways Ltd
Extended partnership with Emirates: Qantas Airways Ltd (ASX: QAN) had reported for the second highest profit for 2016/2017 in its history while the group’s international segment was still seen to be at a challenging front. The group had recently entered a five-year extension with Emirates alliance to provide better customer services. They shifted capacity to cater the rapidly growing Asia market while delivered further benefits to the eight million passengers who have travelled more than 65 billion kilometers on the combined network since 2013. The group now expects an annualized net benefit of more than $80 million from FY19. On the other hand, QAN stock delivered outstanding returns of over 75.4% in this year to date (as of October 04, 2017), and surged up 3.2% on October 05, 2017 while positive sentiments surrounded the stock with upgrade in investment ratings in the market. However, the run-up in the stock points towards trading at high levels. We give an “Expensive” recommendation on the stock at the current price of $ 6.12
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Financial Highlights for 2016/2017 (Source: Company Reports)
Virgin Australia Holdings Ltd
Weak bottom line:Virgin Australia Holdings Ltd (ASX: VAH) is focusing on their cost base and executing their ‘Better Business Program’ for the second year which remains ahead of schedule. The group is seeking to expand their Greater China presence, which is Australia’s fastest growing travel markets. On the other hand, they delivered losses at the underlying and statutory levels for the 2017 financial year impacted by subdued trading conditions and the upfront costs related with implementing the Better Business program. Statutory Loss after Tax rose $38.9 million to $185.8 million during the year. VAH stock lost over 5.3% in the last four weeks (as of October 04, 2017) and we maintain our “Expensive” recommendation on the stock at the current price of $ 0.18
Air New Zealand Ltd
Fall in earnings:Air New Zealand Ltd (ASX: AIZ) reported that they continue to face disruption to their operations post a temporary shut-down of Refining New Zealand’s pipeline into Auckland. Moreover, the earnings before taxation for the 2017 financial year fell to $527 million, against $663 million in the prior corresponding year. While the increase in industry capacity and entry of international carriers in the market have posed some challenges, the stock could still generate over 81.2% in last one year (as of October 04, 2017) at the back of fundamentals including strong operating cash flow. Given the high trading level, challenges at hand and volatility in jet fuel, we put an “Expensive” recommendation at the current price of $ 3.12
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Earnings before taxation (Source: Company reports)
Flight Centre Travel Group Ltd
Expanding penetration via acquisitions: Flight Centre Travel Group Ltd (ASX: FLT) is now noted to be on a transformation stint and expects a more normal environment in FY18 with modest fare changes as opposed to challenges witnessed earlier. The group recently finished Travel Partners business’ acquisition which is a Sydney-based business with a strong sales force of home based / mobile travel agents, and would boost their Australian business by expanding into a fast-growing sector of the leisure market. They also finished Travel Managers Group (TMG) acquisition which has more than 180 individual brokers and operates a 22-shop franchise network, including 12 TravelSmart shops and 10 non-branded stores. Given the scenario, we maintain a “Hold” on the stock at the current price of $ 43.89
Webjet Ltd
Concerns over FY18 performance: Webjet Ltd (ASX: WEB) showed solid organic growth in overall bookings and integrated Online Republic under business to consumer segment, and has also sold Zuji. The group acquired JacTravel for A$330 million, positioning their WebBeds division as the No. 2 global B2B hotels business. Total transaction value (TTV) on continuing operations surged 35.7% to $1,950 million against the prior corresponding period, leading to a revenue rise of 37.2% to $188.8 million. Net profit after tax surged 58.0% to $33.1 million while EPS enhanced 29.8%. WEB delivered a three-year CAGR in organic travel bookings of 26% across the business and 36% after acquisitions. Their investments in WebBeds B2B hotels business led to bookings growth of 49.4%. However, WEB stock lost over 9.5% in the last four weeks (as of October 04, 2017) with uncertainties hovering over no definitive FY18 guidance and performance outlook. We rate the stock to be “Expensive” at the current price of $ 10.42
Regional Express Holdings Ltd
Bumper profit result:Regional Express Holdings Ltd (ASX: REX) stock generated outstanding returns of over 81.5% in this year to date (as of October 04, 2017) and delivered a statutory profit before tax (PBT) of $17.8 million (M) on a turnover of $281M which represents a quadrupling of the operational PBT of $4.3 million of previous year. The group announced a final dividend of 10 cents per share (fully franked) and has a solid 7% dividend yield. But the heavy rally in the stock has placed them at higher levels andwe give an “Expensive” recommendation at the current price of $ 1.42
Alliance Aviation Services Ltd
Signed contract with MMG Dugald River: Alliance Aviation Services Ltd (ASX: AQZ) signed a contract for the provision of air charter services for MMG Dugald River Pty Ltd between Townsville and Cloncurry. The initial contract is for two years with a further two years at MMG’s option. This contract would offer clients with the best on time performance in the industry. Given these, AQZ stock already trades at a higher level with a rally of over 82.1% in the last six months (as of October 04, 2017) and we maintain an “Expensive” recommendation at the current price of $ 1.28
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