The Regional Express Holdings Ltd (ASX: REX) share price has recovered more than 195% from its lows in late-March and is trading relatively flat for the year.
Australia’s largest regional airliner’s share price recovery has dwarfed that of larger airliners like Qantas Airways Limited (ASX: QAN) and Virgin Australian Holdings Ltd (ASX: VAH). Here’s why the Regional Express share price has been flying under the radar and why it could be a long-term buy.
Expanding into the ‘Golden Triangle’
Regional Express recently announced that the airliner will expand its domestic operations into the ‘Golden Triangle’. In local aviation terms, the ‘Golden Triangle’ refers to the lucrative domestic routes between Sydney, Melbourne and Brisbane.
The company will look to raise $30 million to support the initiative in order to purchase 5–10 narrow-body jets to be based in major cities on the east coast. The airliners board aims to have the new routes in operation by the start of March 2021. The company’s new domestic operations will be priced at affordable levels and incorporate its hybrid business and service model.
How has Regional Express performed?
Regional Express operates exclusive services to 60 regional destinations in Australia and currently has a fleet of 60 Saab aircraft. The company has made an operational profit every year since 2004, 2 years after it was founded.
Despite the company’s resilience and consistent profitability, Regional Express has not been spared the impact of the coronavirus pandemic. The airliner withdrew its profit guidance in mid-March and has managed to maintain services to regional Australia thanks to funding arrangements with both federal and state governments.
Should you shares in Regional Express?
Regional Express currently dominates regional services, covering 85% of the routes on offer. However, it should be noted that expanding into servicing capital cities comes with a range of additional risks. The current environment also remains highly volatile given the evolving nature of the coronavirus pandemic. Qantas also sacked 6,000 workers and implement a 3-year recovery plan, despite being a highly-regarded airliner.
If Regional Express can build on its existing infrastructure and maintain a lower cost base, it should be competitive. I think the prospect of Regional Express expanding its services would be great for consumers and potentially shareholders, too. I think investors should keep an eye on the sector and Rex, in particular, before making an investment decision.
We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
More reading
- The latest ASX stocks to be upgraded by brokers to “buy”
- Top brokers name 3 ASX 200 shares to buy today
- What does the future hold for the Qantas share price?
- Leading brokers name 3 ASX 200 shares to sell today
- Why the Regional Express share price is soaring 28% this week
Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The post This ASX airliner is flying under the radar appeared first on Motley Fool Australia.
from Motley Fool Australia https://ift.tt/2Vzsc0k
Leave a Reply