Alan Joyce says, based on the value of Qantas' net tangible assets, its share price should be Aus$2.40
Qantas chief executive Alan Joyce has ruled out an equity raising despite the embattled airline's flailing share price, but is preparing a high-level team to ward off any possible hostile takeovers.
Shares in the flagship Australian airline last week dived below Aus$1 (US$0.99) for the first time since it was floated in 1995 after being put on credit watch by Standard & Poor's.
But Joyce said despite the stock plunging as low as 96.2 cents, prompting speculation that it would soon look to raise capital, the measure was not necessary to allow the carrier to retain its investment-grade credit rating.
"We don't need to raise equity in order to do that," Joyce said in comments from the sidelines of the International Air Transport Association conference in Beijing reported in The Australian newspaper Tuesday.
Qantas shares tanked last week after S&P put its BBB/A-2 investment-grade rating on credit watch negative following warnings of a huge profit slump.
The "Flying Kangaroo" has said underlying profit before tax is expected to drop from Aus$552 million last year to Aus$50-100 million due to soaring fuel costs and worsening global conditions driven by European debt woes.
Joyce said the company was continuing with its strategy to turn international business losses around, adding: "I believe fundamentally that the underlying value of the company will come through in the share price.
"And it's very clear that the underlying value of the company is worth a lot more than the share price is today."
Shares recovered almost 11 percent Tuesday to close at Aus$1.075, but remain well short of their peak around Aus$6 in October 2007 before the global financial crisis which stripped it of almost half its value in six months.
Given the current share price, Qantas has formed a key management group headed by Joyce to deal with any possible takeover bids that emerge, reports said.
The airline has also hired investment bank Macquarie Group to advise it in the event of any potential takeover and Citigroup to watch its share register.
Qantas was targeted by private equity consortium Airline Partners Australia (APA), led by the Allco Finance Group, in 2006.
Although backed by the Qantas board at the time, the Aus$11 billion offer was unsuccessful after it failed to win sufficient shareholder approval. Allco later collapsed.
Joyce said Qantas had the confidence of its key shareholders, and this was seen in recent days when the carrier's biggest investor Capital Group took another two percent in the company.
"The support we've got from the shareholders has been quite substantial," Joyce said, adding that he was confident that in 2014 "the business will get to break even".
Emirates president Tim Clark Tuesday ruled out investing in Qantas, but said he was keen to cooperate with the carrier to expand his airline's presence in Oceania.
"Emirates is a wholly organic animal," Clark said from the Beijing conference. "We are not an M&A vehicle, we don't really get involved in that."
-- Dow Jones Newswires contributed to this story --