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Wirraway
22nd Aug 2002, 17:44
Fri "Sydney Morning Herald" 23/8/02

Demand for Qantas shares is world class
By Mark Todd
August 23 2002

Qantas Airways has underlined its status as perhaps the world's best airline investment by tucking away the first stage of an $800 million capital raising with enough demand to cover the offer several times over.

Institutions in Australia and overseas will pay $4.20 for shares in a $600 million 1-for-8 offer to existing holders of the stock. Small investors will have the opportunity to buy shares at the same price in an offer opening on September 9 to raise about $200 million.

Qantas traded at $4.69 before the stock was suspended while institutions tendered bids for shares. It is believed the underwriters to the capital raising - Macquarie Equities, Salomon Smith Barney, and UBS Warburg - counselled Qantas that demand was such that the airline, had it wished, could have raised more than the amount sought.

"This has been one of the strongest levels of demand we've seen in a number of years for a substantial capital raising," one of the issue's joint lead managers said.

Major shareholder British Airways did not participate in the issue but its $170 million allocation of shares was eagerly snapped up. BA's holding falls from around 21 per cent to 17 per cent.


Qantas will use the funds to expand, in the first instance by increasing its fleet and then within a month or so through a potential alliance with Air New Zealand. The Flying Kangaroo is expected to take a 25 per cent share in Air New Zealand for up to $400 million.

Chief executive Geoff Dixon said on Wednesday that Qantas would not seek to raise fresh funds in the equity market again until after June 2004.

The $800 million share issue capitalises on perhaps the airline's most outstanding annual result. Qantas made $428 million net profit in 2001-02, a year in which other airlines lost a combined $US12 billion due to a slump in demand for international travel after the September 11 terrorist attacks.

ABN Amro described the result as "expectedly strong" while Deutsche Bank noted it was stronger than forecast but contained no surprises. Others were mildly concerned about the airline capitalising interest and higher than anticipated wet leasing charges, but these issues were offset by a rebound in the international business and the strong net profit number.

"You'd say it was a reasonable to good result," said Troy Angus of funds manager Sagitta Rothschild.

Although the company did not provide any specific guidance on future earnings, analysts are expecting Qantas to have another strong year in 2002-03. On average, they are forecasting a net profit of $569 million, with estimates in a wide range from $520 million to $650 million.

1A_Please
23rd Aug 2002, 00:38
As a QF shareholder I am puzzled why the book-build price was struck so low. No wonder the offer was over-subscribed. Stags could make a quick profit simply by subscribing in the book-build and then flogging the stock. In the meantime, existing shareholders have seen their shares fall by 4% from their pre-suspension price today whilst the stags pocket the profits!

Wirraway
23rd Aug 2002, 00:59
AAP

Qantas shares sharply lower
August 23, 2002

QANTAS Airways Ltd shares were sharply lower in early trade.

Qantas this morning said it had successfully completed the institutional part of its $800 million capital raising, with strong support.

Qantas shares were four per cent, or 20 cents lower, at $4.49 just after the open.

The fall was expected given the stock was ex-dividend and now ex-rights, following the institutional entitlement offer, an analyst said.

"The price it is trading at now is the ex-rights price, which on a one-for-eight you would obviously expect it to be down," he said.

"I wouldn't watch the share price probably for the next two hours or so and then wait for it settle down, because there is a lot of business being done in terms of people who didn't get the right allocation suddenly wanting to buy some more, people who got stuff which they wanted selling it for a small profit."

Qantas had allocated shares on the basis of a pro-rata entitlement of one share for every 8.2 shares, at an issue price of $4.20.

"Most of this morning you are going to have a very volatile Qantas share price as those people who suddenly find out what their allocation is decide what they are going to do with it," the analyst said.

He expected the stock would eventually close about $4.50.

Earlier Qantas chief executive Geoff Dixon said there had been strong support for the institutional offer. "We are very pleased with the strong support demonstrated by institutional investors for the capital raising and our growth plans," Mr Dixon said.

Settlement of the institutional component had been underwritten and was expected to be completed on September 5.

Qantas said strong bidding from both existing shareholders and new investors led to "significant excess demand" for the British Airways entitlement and other renunciations.

The second part of the entitlement offer, to retail investors, will be at the same pro-rata ratio of one for 8.2, at the same issue price of $4.20.

Depending on retail participation, Qantas expected to raise up to $800 million through the offer.

The retail component is due to open on September 9 and close on September 27.

ABN Amro Morgans Ipswich manager Tony Russell said Qantas shares were falling because of the dilution of the share price and the discounted entitlement issue price.

"Keeping in mind there are now more shares on issue, there is a dilution there in the price," Mr Russell said.

"At $4.20 that is also a reasonable discount to where they have been trading," he said.

AAP