Investor appeal soars
OVERSEAS investors in Qantas Airways could soon be forced to offload some of their stock as they flirt with the foreign ownership ceiling at the resurgent flag carrier.
In a development that threatens to reignite the debate over the ownership cap, the Flying Kangaroo has revealed foreign investors now own 46.73 per cent of its shares.
It comes as investors abroad increasingly clamour for a slice of the group amid a phoenix-like rise in its share price under long-serving chief executive Alan Joyce.
Mr Joyce has previously called for the 49 per cent cap on foreign ownership at Qantas to be axed, saying it hinders the airline’s ability to compete.
It limits the company’s participation in a trend of consolidation in the global aviation sector, he has said, and creates an uneven playing field that favours key rival Virgin Australia.
Virgin is not subject to the cap and is more than 80 per cent foreign owned.
Industry insiders have said the success of Mr Joyce’s turnaround program have made Qantas a highly desirable stock for domestic and overseas investors, and the high level of foreign investment may be a “new normal”.
Offshore investors now have about $4.5 billion worth of Qantas stock, with a buffer of just 2.3 percentage points between their current holding and the cap under the Qantas Sale Act.
The foreign ownership interest is the highest since October 2014, when it stood at 47.8 per cent having hit 48.8 per cent the previous month.
It hit 50.4 per cent in 2003, triggering a forced sell down of shares. In the event foreign investors again breach the 49 per cent cap, there would be another forced sale under a “last in, first out” rule.
Qantas shares closed 0.4 per cent higher yesterday at $5.32. They have rallied almost 60 per cent his year – compared with a rise of about 1 per cent in the benchmark ASX 200 share index – but some industry experts believe there is scope for further gains.
Analysts at investment banks UBS, Macquarie and Credit Suisse have target prices on Qantas shares ranging from $5.90 to $6.75, although Goldman Sachs and JP Morgan have weaker target prices – $5.14 and $4.15 respectively.
It comes as Qantas prepares to launch its “game changing” 787-9 Dreamliner in October, which will allow for direct flights to Europe, New York and London.