DCF Studio

    QAN.AX · ASX · Industrials

    Qantas Airways Limited

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    AUD 20.81

    Market price

    AUD 8.73

    Implied upside

    +138.3%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedSome line items were not reported and have been derived. Each one is labelled in the workings below.
    AdjustedCapital expenditure runs at 14.4% of revenue against depreciation of 8.7%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    AUD 20.81+138.3%
    Exit multiple
    AUD 13.07+49.7%
    Market price
    AUD 8.73

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (AUD). Outflows negative.

    0m250m500mFY27FY28FY29FY30FY31
    Nominal FCFFDiscounted to todayAUD
    LineFY27FY28FY29FY30FY31CAGR
    RevenueAUD 27.4bnAUD 29.9bnAUD 32.5bnAUD 35.4bnAUD 38.5bn+8.9%
    EBITAUD 2.5bnAUD 2.8bnAUD 3.0bnAUD 3.3bnAUD 3.6bn+8.9%
    NOPATAUD 1.8bnAUD 1.9bnAUD 2.1bnAUD 2.3bnAUD 2.5bn+8.9%
    Add depreciation & amortisationAUD 2.4bnAUD 2.6bnAUD 2.8bnAUD 3.1bnAUD 3.4bn+8.9%
    Less capital expenditureAUD -3.9bnAUD -4.3bnAUD -4.7bnAUD -5.1bnAUD -5.5bn+8.9%
    Less increase in working capitalAUD 118.4mAUD 128.9mAUD 140.3mAUD 152.7mAUD 166.3m-8.9%
    Free cashflow to firmAUD 356.0mAUD 387.6mAUD 421.9mAUD 459.3mAUD 500.1m+8.9%
    Discount factor0.96640.90240.84270.78700.7349-
    Present valueAUD 344.0mAUD 349.7mAUD 355.6mAUD 361.5mAUD 367.5m+1.7%
    Present Value Of The ForecastAUD 1.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.35%Australian Government 10-year (RBA F2)
    Equity risk premium6.00%Market assumption
    Beta0.722Reported 0.585, pulled toward 1.0 (Blume)
    Cost of equity9.68%Risk-free + beta x equity risk premium
    Cost of debt5.35%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationAUD 13.2bn56.1% of capital
    Total debtAUD 10.4bn43.9% of capital, book value as a proxy
    Tax rate29.5%Effective, capped at statutory
    WACC7.08%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareAUD 20.81

    95% of EV

    Forecast FCFF, final year
    AUD 500.1m
    Capex at depreciation, working capital in reinvestment
    AUD 2.5bn
    Less reinvestment at g/ROIC (11.1% of NOPAT)
    AUD -280.3m
    Capitalised
    AUD 2.2bn
    ROIC (reported)
    22.4%
    Terminal value, undiscounted
    AUD 50.0bn
    Terminal value, discounted
    AUD 36.7bn
    Enterprise value
    AUD 38.5bn
    Less net debt
    AUD 6.8bn
    Equity value
    AUD 31.7bn

    Exit at 4.9x EBITDA

    Value per shareAUD 13.07

    93% of EV

    Terminal value, undiscounted
    AUD 33.9bn
    Terminal value, discounted
    AUD 24.9bn
    Enterprise value
    AUD 26.7bn
    Less net debt
    AUD 6.8bn
    Equity value
    AUD 19.9bn

    Spread between methods: 46%.

    Sensitivity

    Value per share (AUD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    5.08%31.6536.5243.2853.2669.52
    6.08%22.8825.5128.8833.3339.49
    7.08%17.2818.8720.8123.2026.26
    8.08%13.4214.4515.6617.1018.85
    9.08%10.6011.3012.1013.0314.12

    Outlined: this model. Green text: above today's price of 8.73. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year8.9%-4.1%-13.0pp
    EBIT margin9.3%5.5%-3.7pp
    Discount rate7.1%10.4%+3.4pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.