Qantas is reporting a profit but is one of the poorest performing stocks onthe Australian Stock Exchange having lost over 60% of its value since the failed private equity bid in 2006.
Whilst it is making a small profit relative to its revenues analysts are unimpressed with the stock for a number of reasons:
- Underperforming international business that was previously the backbone of the business and is now perceived as being without a cogent strategy.
- No dividend paid to shareholders for a number of years. Dividend streams are very important in Australia due to favourable tax treatment due to franking.
- Significant capital expenditure required in future years that was originally forecast to be funded from profits. This will now need to be debt funded as capital funding is untenable given the dire share price.
- Domestic business is under attack from a revitalised Virgin Australia led by John Borghetti who many thought should have got the CEO role at QF
when Geoff Dixon retired.
- Industrial relations issues are ongoing
- Most profitable part of the business is the Frequent Flyer Program. Many believe the company (and its shareholders) would be better off if this was spun off to unlock the value.