Qantas, of all companies, appeared on my ROC scanner last night...it has dropped a fair bit of value over the last couple of days since the AGM. Currently sitting at $1.30. So I'm curious...is it worth a buy.
Fundamentals don't look great. Making a minimal ROE of 0.1% (or basically nothing). Compared to the WACC I have calculated of around 6% (way below the 10.5% used by Qantas themselves), it still isn't making it's costs of capital meaning that ultimately, the book value will continue to drop.
Current tangible book value for share is $2.42, but I'm not surprised that it isn't trading at that. If a company doesn't make its WACC, book value only goes one way....down.
All that said, $1.30 does look cheap. Using DCF methods using FCFF of $330 million and the WACC of 6% and a growth rate of between (-2% to -3%....the guidance given for yields at the AGM), I have a price target of between $1.80 and $1.58...at least a 21% premium to the current price.
Boarding!
Disclaimer: This is not a recommendation to invest/not invest in Qantas. Please see your financial advisor.
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I'd be interested to know how you got the WACC of ~6%!
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