Ann: HY24 Results Presentation, page-2

My reflections on the half year announcements:

• Good, strong trading results in line with expectations.
• Noting comment that second half of the financial year will be stronger than the first half (as was the case in FY23), on track for guided full year NPBT of $83.7m.
• Assuming tax expense at 30% (i.e. statutory rate and half year run rate) this would produce NPAT of $58.6m which is EPS of 36.45 cps and a PE ratio of 9.14 times at $3.33 share price.
• In addition to the purchase of two E190's for parting out in the half year, AQZ have also purchased two F100's for parting out. This will help with keeping the existing F100's flying a bit longer. Both Qantas and Virgin are reducing their F100 fleet's in WA so assume the two purchased were sourced within Australia.
• Comments around not having committed funding for the remaining $300m to $336m of capital expenditure over the next two and a half years to further grow the E190's operating fleet and aircraft for spares is a concern, especially given the run rate on purchases over the next 12 months is higher. While AQZ are confident they can access the necessary funding (or possibly sell some of the aircraft), this will increase further the current borrowings to assets ratio of 33%. While this isn't particularly high for an airline, given the age of the F100 fleet it doesn't make much sense to carry borrowings on these. Why not just bite the bullet and undertake a further capital raise of $100 to $150m to take the pressure off?
• The additional E190's that need to be funded will increase profits further once they are operational. If AQZ can successfully debt fund the expansion, the shares will be cheap with the benefit of hindsight. The further expansion is not however without risk - operational, financing and market demand for the additional flying.
• AQZ state they won't be in a cash tax paying position to 2026 so given the lack of any franking credit balance coupled with the funding issues, my pick is that AQZ won't declare any dividends until at last 2026.