Corporate Action: Another Buyback, Another Potential Exit for Qantas Shareholders

Shares in no-moat Qantas remain expensive following the release of its first-half fiscal 2020 earnings. The firm also announced another off-market share buyback--this time for AUD 150 million--which may prove an attractive option for some investors looking to take some off the table. We expect Qantas is buying back less than 2% of shares on issue, and given the buyback discount of 14%, the impact on our fair value estimate is immaterial. Underlying profit before tax, or PBT, for the first half of fiscal 2020 remained virtually flat compared with the prior corresponding period, or PCP, at AUD 771 million. However, the coronavirus outbreak is weighing on earnings and the near-term outlook appears soft. We maintain our fair value estimate of AUD 5.00 per share, as our softer near-term forecasts are broadly offset by the time value of money. Our forecasts now include the impact of the new accounting standard for leases, AASB 16.