At the time of writing, the Goodman Group (ASX: GMG) share price was up 3.57% to $18.27 after the company released its annual results for the financial year to 30 June 2020.

What was in the announcement?

Goodman Group had revenue of $2.63 billion in the 2020 financial year, this was down 13% on the 2019 financial year.

According to the company, net profit after tax was $1.50 billion in the 2020 financial year, this was compared to net profit after tax in the 2019 financial year of $1.63 billion.

Diluted earnings were 80 cents per share in the 2020 financial year.

The group’s operating profit, which was profit before certain non-cash items, was $1.06 billion in financial year 2020, a 12.5% increase on financial year 2019.

Goodman Group forecast that it would pay a full year distribution of 30 cents per share in financial year 2021. It also forecast operating profit in the 2021 financial year of $1.17 billion and operating earnings per share of 62.7 cents.

At 30 June, Goodman Group had total assets under management of $51.6 billion.

In their Directors’ report, the Goodman Group Board stated;

“The Board  acknowledges the unprecedented times the world is experiencing and the terrible impact COVID-19 is having on people’s lives and livelihoods. Goodman’s markets have been affected at various times and to varying degrees, but the Group has adapted to this new operating environment with limited disruption and has continued to  grow the business sustainably for the long term. Goodman plays an important role in providing both essential infrastructure and making a tangible difference for customers in the cities in which the group operates.”

“Over the past decade, the Group has established significant human capital, financial resources and a well located real estate portfolio, to sustain the business through market cycles. This is reflected in the results for the financial year with Goodman reporting operating profit of $1060.2 million, compared to $942.3 million for the prior year, an increase of 12.5%. This equates to an operating EPS of 57.5 cents, up 11.4% on FY19.”

About the Goodman Group share price

Goodman Group is a real estate company that develops, owns and manages commercial and industrial properties. Its properties include warehouses and logistics facilities along with business and office parks. Goodman Group has been listed on the ASX since 1995.

The Goodman Group share price is up 90.31% since its 52-week low of $9.60, it has returned 35.94% since the beginning of the year. The Goodman Group share price is up 21.80% since this time last year.

More reading

• How the Goodman Group share price gained 14% in July amid a difficult real estate market
• Why I would buy Goodman Group and these blue chip ASX shares
• 3 core holdings for a $100,000 ASX portfolio
• Buy these outstanding ASX 50 shares for strong potential returns
• 5 things to watch on the ASX 200 on Monday

Motley Fool contributor Chris Chitty 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.

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The Telstra Corporation Ltd (ASX: TLS) share price has slumped 5.3% lower today after releasing its full-year earnings.

What did Telstra announce today?

The Aussie telco reported 5.9% decline in total income to $26.16 billion in FY20. That is within the guidance range of $25.3 billion to $27.3 billion, albeit a little on the low side.

Telstra’s largest segment, Consumer and Small Business, struggled in FY20. The business unit reported a 6.7% slump in income to $13.33 billion while Telstra’s Enterprise revenue fell 3.3% to $7.97 billion.

The telco’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) totalled $7.4 billion and landed within guidance.

Telstra also delivered free cash flow of $3.4 billion which was within the guidance range of $3.3 billion to $3.8 billion. The telco also maintained its full year dividend at 16 cents per share, fully franked.

The outlook was a little unclear for Telstra as management acknowledged the difficulties presented by the coronavirus pandemic.

Why is the Telstra share price falling?

It looks like investors have been bearish on the result as the Telstra share price has fallen 5.3% lower to $3.21 per share.

That could be partially due to the estimated impact of COVID-19 with FY21 underlying EBITDA forecast to be $6.5 billion to $7.0 billion.

NBN impacts continue to drag on earnings with management forecasting a negative $700 million impact in FY21.

Despite hitting guidance on a number of key metrics, most of the figures are at the low end of the provided range. That means some investors may have been pricing in a higher-end result than was achieved in FY20.

That has been enough to spook investors and send the Telstra share price tumbling lower in early trade.

How has Telstra performed in 2020?

The Telstra share price has fallen 9.8% lower this year while the S&P/ASX 200 Index (ASX: XJO) is down 8.5%.

It looks like there are some headwinds looming for the Aussie telco but it could still be a solid dividend share based on this morning’s results.

More reading

• Northern Star share price falls 1.6% on trading update
• Qantas share price is facing this new challenge in FY21
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• Telstra hits guidance and declares 16 cents per share FY 2020 dividend

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) has given back its early gains and is dropping lower. At the time of writing the benchmark index is down 0.25% to 6,116.4 points.

Four shares that are not letting that hold them back are listed below. Here’s why they are storming higher:

The AMP Limited (ASX: AMP) share price has jumped 11% to $1.53. This morning the financial services company released its half year results and revealed an underlying profit of $149 million. It also revealed plans to return $544 million to shareholders. This comprises $344 million via a fully franked special dividend of 10 cents per share and up to $200 million via an on-market share buy-back.

The Premier Investments Limited (ASX: PMV) share price is up almost 9% to $18.39. This follows the release of a second half trading update by the retail conglomerate. Although the company’s retail business will report a decline in overall sales, the business still expects to deliver profit growth in FY 2020. This is due to a big jump in higher margin online sales during the financial year.

The QBE Insurance Group Ltd (ASX: QBE) share price has stormed 5.5% higher to $10.61. This morning the insurance giant released its half year results and revealed a statutory net loss after tax of $712 million. This was actually better than its guidance for a loss of $750 million for the half. This reflects the impact of COVID-19, catastrophe experience and a pre-tax investment loss of $90 million. Despite this loss, QBE declared a 4 cents per share interim dividend.

The Treasury Wine Estates Ltd (ASX: TWE) share price has jumped 12% to $12.60 following the release of its FY 2020 results. For the 12 months, the wine company reported a 6% decline in net sales revenue to $2,649.5 million and a 22% decline in EBITS to $533.5 million. Treasury Wine Estates’ performance was impacted by challenging conditions in the US wine market and the COVID-19 pandemic. The latter impacted the sales of high margin luxury products.

More reading

• QBE share price surges 7% despite reporting first-half loss
• Premier Investments share price zooms 12% higher on strong trading update
• Treasury Wine Estates share price jumps higher on FY 2020 results
• 5 things to watch on the ASX 200 on Thursday
• Link share price buoyed by appointment of new CEO

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Treasury Wine Estates Limited. 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.

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The QBE Insurance Group Ltd (ASX: QBE) share price has surged more than 7% in early trade, despite the insurer reporting a loss for the first-half of 2020.

How did QBE perform for the first half of 2020?

Earlier today, QBE released its results for the half year ending 30 June 2020.

The company’s interim result for 2020 saw QBE report a half-year loss of US$712 million, compared to a US$463 million profit in the prior corresponding period. QBE noted that the result was slightly better than previous estimates.

QBE also reported a 10% increase in gross written premiums for the first half of US$8.04 billion. The company also noted a hardening in premium rates, especially in the company’s North American and international divisions.

The insurer recorded a US$335 million hit from the impacts of COVID-19 and other catastrophe claims. For the first-half, QBE recorded catastrophe claims of US$304 million, exceeding its allowance of US$252 million. The surge in claims was fuelled by widespread bushfires, hail and storm activity in Australia.

The increase in claims was reflected in QBE’s combined operating ratio (COR). For the first-half, QBE reported a COR of 103.4%, indicating that the insurer is paying out more in claims than it is receiving in premiums. The company noted that excluding the impacts of the COVID-19 pandemic would result in a COR of 97.4% for the first half.

Despite reporting a loss in the first-half, QBE’s management reiterated that the company remained well capitalised to endure the ongoing impacts of the COVID-19 pandemic. To reflect the board’s confidence, QBE declared an interim dividend to shareholders of 4 cents per share.

The outlook for QBE

QBE is the second-largest insurer in Australia and operates in 3 segments, with insurance operations in 27 countries.

In its half-year report, the insurer acknowledged the uncertainty surrounding the impact of the COVID-19 pandemic. Despite the uncertainty, QBE expects to capitalise on accelerating pricing momentum and organic growth opportunities given its strong capital base.

In late April QBE completed a US$750 million capital raising in order to help the company withstand a range of economic and investment downside scenarios.

QBE expects total COVID-19-related costs to climb to US$600 million, including US$265 million of potential further net claims that could emerge over the next 12–18 months.

QBE also noted that the company is supporting customers through the crisis by offering premium refunds, premium deferrals, extending credit and counselling services.

Foolish takeaway

At the time of writing the QBE share price has surged more than 7% higher for the day at an intra-day high of $10.83.

More reading

• Why AMP, Premier Investments, QBE, & Treasury Wine shares are storming higher
• Link share price buoyed by appointment of new CEO
• Leading brokers name 3 ASX shares to buy today
• These were the ASX 200’s biggest share gainers last week
• ASX 200 Weekly Wrap: ASX has week of high volatility

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.

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The Premier Investments Limited (ASX: PMV) share price is zooming higher on Thursday after providing a second half trading update for its Retail business.

At the time of writing the retail conglomerate’s shares are up over 10% to $18.65. At one stage they were up as much as 12% to $19.02.

What did Premier Investments announce?

According to the release, for the 26 weeks ending 25 July 2020, the company’s global sales were $484.2 million. This was down $106.5 million or 18% on the second half of FY 2019.

Things would have been a lot worse for the company had it not had such a strong online business. The company’s online sales hit $123.3 million during the second half, up $50.8 million or 70% on the prior corresponding period.

This means they contributed 25.5% of its total second half sales, up from 12.3% for the same period last year. For the full year, online sales were $220.4 million, up 48.8% on FY 2019 and contributing 18.1% of its total FY 2020 sales.

One big positive with this strong online sales growth is that its ecommerce sales deliver a significantly higher earnings before interest and tax (EBIT) margin than its retail stores.

In light of this, it now expects its second half Retail EBIT to be between $58.7 million and $59.7 million, up between $5.2 million and $6.2 million or 9.7% and 11.7% on the prior corresponding period.

This means that its full year Retail EBIT is expected to be between $184.8 million and $185.8 million in FY 2020, up 10.5% to 11% on FY 2019’s result.

It is worth noting that the figures mentioned above are only for its Retail business and do not include any results from its investment division. Nor have they been audited or include any potential asset value impacts resulting from COVID-19.

Premier Investments’ full year results are expected to be released to the market in late September.

More reading

• Why AMP, Premier Investments, QBE, & Treasury Wine shares are storming higher
• How you can take advantage of the surging Australian dollar
• You probably shop at these 7 ASX retailers. Should you buy shares in them too?
• Leading brokers pick the latest ASX 200 stocks to buy today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. 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.

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The Northern Star Resources Ltd (ASX: NST) share price has slumped 1.6% lower in early trade despite reporting an increase in planned production.

Why is the Northern Star share price on the move?

The Aussie gold miner reported FY21 expected production guidance, excluding KCGM, of 720,000 to 820,000 ounces.

KCHM is the joint venture between Northern Star and Saracen Mineral Holdings Limitedd (ASX: SAR) in the Kalgoorlie Super Pit gold mine.

Northern Star is forecasting production to climb to ~900,000 in FY22 and ~1,000,000 in FY23.

On top of that, the miner’s all-in sustaining cost (AISC) is forecast to fall 10% lower over that period.

Despite the seemingly good news, the Northern Star share price has fallen lower in early trade. That comes after gold prices endured their worst day in seven years yesterday which sent ASX gold shares tumbling lower.

Northern Star reported an increase in Group Resources by 3,200,000 ounces to 22,300,000 ounces. Resources per share have grown by 120% over the past 5 years excluding KCGM.

It’s a similar story in relation to Group Reserves which have jumped 12% to 6,000,000 ounces as at 30 June. Reserves per share are up 180% over the last 5 years despite production of 3,600,000 ounces.

FY21 guidance

The Aussie gold miner also provided FY21 guidance in today’s update.

Northern Star expects Australian production guidance excluding KCGM to total 540,000 to 600,000 ounces in FY21. The miner is forecasting an AISC of A$1,425 to $1,525 per ounce this financial year.

FY21 guidance for its Pogo operations is expected to total 180,00 to 220,000 ounces at an AISC of US$1,200 to US$1,400 per ounce.

The Aussie gold miner continues to grow its exploration and production, budgeting A$95 million for exploration in FY21.

However, investors have continued to sell out this morning, sending the Northern Star share price down 1.6%.

The S&P/ASX 200 Index (ASX: XJO) has opened the day up 0.25% at just over 6,130 points in early trade.

More reading

• Qantas share price is facing this new challenge in FY21
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result

Motley Fool contributor Ken Hall 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.

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The Arena REIT No 1 (ASX: ARF) share price is trading 1.79% higher in early trade (at time of writing) following the release of its FY20 results. Arena is a real estate investment trust (REIT) that invests in sectors such as childcare, healthcare, education and government tenanted facilities leased on a long term basis.

FY20 highlights

Arena REIT announced a net operating profit for FY20 of $43.8 million. This represents an increase of 16% on the prior corresponding period (pcp).

The REIT’s statutory net profit increased 29% to $76.6 million from $59.3 million compared to the pcp.

Earnings per share (EPS) of 14 cents is up 4% on the pcp. This came below consensus estimates of 15.8 cents per share.

The group was able to deliver a 4% distribution per security of 14 cents in FY20.

Total assets increased 23% in FY20 to $1,012.6 million on FY19 as a result of acquisitions, development capital expenditure and the positive revaluation of the portfolio. The revaluation of property was the primary contributor to the 6% increase in net asset value (NAV) per security to $2.22 at 30 June 2020.

Pleasingly, its gearing ratio has decreased from 22.1% in FY19 to 14.8% by FY20.

Commenting on the result, Arena’s managing director Mr Rob de Vos said, “Despite ongoing uncertainty, we remain confident in Arena’s strategy, the strength of our portfolio and the important contribution the services we accommodate will make in aiding economic recovery and improving future community outcomes.”

COVID-19 impact

Despite 100% occupancy being maintained, the group has experienced some impact from the coronavirus pandemic. It has provided some rent relief to some tenant partners amounting to 4% of contracted rent for FY20.

The breakdown of the impact on Arena during the pandemic for the period 1 July 2019 to 30 June 2020 is as follows:

• 96% of contracted rent receipted
• 3.5% of contracted rent deferred, of which 71% is scheduled to be received in FY21
• 0.5% of contracted rent abated.

Outlook

Arena has provided FY21 distribution per security guidance of between 14.4 and 14.6 cents per security reflecting growth of 3–4% over FY20.

Mr de Vos said:

Arena remains well positioned to navigate the ongoing and emerging challenges arising from COVID-19 and to consider new opportunities that are consistent with strategy and Arena’s investment objective of delivering an attractive and predictable distribution to investors with earnings growth prospects over the medium to long term.

The Arena share price is currently trading at $2.28 per share and has fallen more than 21% in the past year, largely due to the impacts of the coronavirus pandemic.

More reading

• Northern Star share price falls 1.6% on trading update
• Stock split watch: Could Amazon be next?
• Treasury Wine Estates share price jumps higher on FY 2020 results
• Evolution Mining shares on watch as underlying profit jumps 86%
• Qantas share price is facing this new challenge in FY21

Motley Fool contributor Matthew Donald 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.

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In morning trade the Treasury Wine Estates Ltd (ASX: TWE) share price is charging higher following the release of its full year results.

At the time of writing the wine company’s shares are up 10% to $12.55.

How did Treasury Wine Estates perform in FY 2020?

For the 12 months ended 30 June 2020, Treasury Wine Estates’ performance was impacted by challenging conditions in the US wine market and the COVID-19 pandemic. As a result, the company reported net sales revenue (NSR) of $2,649.5 million in FY 2020, down 6% on the prior corresponding period.

This comprises NSR of $1,069.4 million in the Americas, $617.1 million in Asia, $370.6 million in EMEA, and $592.4 million in the ANZ region. While all regions posted NSR declines, the Americas and Asia segments were the worst performers. They reported declines of 5.7% and 14.5%, respectively, year on year.

Unfortunately, due to a 4-percentage point decline in its earnings before interest, tax, SGARA and material items (EBITS) margin to 20.1%, Treasury Wine Estates’ earnings fell harder. It posted a 22% decline in EBITS to $533.5 million. Management blamed the margin decline on an unfavourable volume and portfolio mix during the second half. This was driven by lower luxury sales due to the closure of key channels for higher-margin luxury wine.

On the bottom line, the company’s net profit after tax was down 25% to $315.8 million and its earnings per share fell 26% to 43.9 cents.

This led to the board declaring a fully franked final dividend of 8 cents per share, down 60% from 20 cents per share in the prior corresponding period. This brings its full year dividend to 28 cents per share, which represents a payout ratio of 64%. This is consistent with its long-term dividend policy.

FY 2021 outlook.

In light of the high level of uncertainty across key markets, Treasury Wine Estates won’t be providing any guidance for FY 2021.

However, it notes positive signs of a recovery in China, with depletions up 13% in the fourth quarter, including growth of approximately 40% in June.

Another positive is that the company is currently implementing a number of key restructuring initiatives, primarily in the Americas. These include key changes to its operating model and organisation structure, which are expected to lead to annualised cost savings of at least $35 million in FY 2021 and beyond.

It is also commencing with a restructure of its global supply chain, which is focused on driving optimisation and efficiency across all areas of production. This initiative is expected to deliver annualised cost of goods sold benefits of at least $50 million by FY 2023.

CEO Tim Ford commented: “While we have recently seen positive signs of recovery across a number of our key markets and channels, we are cautious on the near-term outlook given the uncertainty that remains around the pace of that recovery.”

“We remain optimistic around our ability to return to sustainable profit and margin growth over the medium to long-term. Supporting this optimism is our comprehensive strategic agenda, which is focused on building upon what is already a very strong business and positioning it for the next phase of TWE’s growth journey and the achievement of our ambition to be the world’s most admired premium wine company,” he concluded.

More reading

• 5 things to watch on the ASX 200 on Thursday
• Why the Treasury Wine share price is sinking today
• Earnings season: What to expect from Treasury Wine Estates
• 2 ASX shares I would buy for growth and income today
• Is the Treasury Wine share price a buy?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited. 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.

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Aussie gold miner Evolution Mining Ltd‘s (ASX: EVN) share price could be on the move today after a strong full-year result.

What did Evolution Mining announce?

It was a bumper FY20 result for the Aussie gold miner headlined by a record underlying net profit after tax (NPAT) result of $405.4 million.

Statutory NPAT jumped 38% to $301.6 million while earnings before interest, tax, depreciation and amortisation (EBITDA) surged 41% to $1,029.4 million.

Evolution Mining’s EBITDA margin jumped 10% higher from FY19 while group cash flow rocketed 86% to $541.8 million.

Those strong earnings numbers were underpinned by an increase in revenues and royalties. FY20 gold production totalled 746,463 ounces, up from 753,001 ounces in FY19.

The group’s all-in sustaining cost (AISC) came in at A$1,043 (US$700) per ounce – among the lowest gold producers in the world.

Soaring commodities prices and increased volumes were also evident in the company’s bottom line.

Evolution Mining delivered strong margins from many of its major producing mines. That saw the gold miner report record new mine cash flow up 48% to $736 million for the year.

Margins were also strong on a per ounce basis, with group cash flow climbing 88% compared to a 29% increase in gold prices.

What about the company’s dividend?

The Evolution Mining share price is worth watching today after also reporting a 50% jump in its final dividend. The Aussie gold miner will pay a final distribution of 9.0 cents per share, fully franked.

Earnings per share rocketed 84% higher to 23.8 cents per share. Evolution Mining shares closed at $5.54 on Wednesday afternoon.

That implies a price to earnings (P/E) ratio of 23.3 and a dividend yield of 1.6% per annum.

FY21 guidance

Many ASX companies have been unable or unwilling to provide FY21 guidance in the current market.

Group production is anticipated to be 670,000 to 730,000 in FY21 with an AISC of 1,240 to 1,300 per ounce.

However, Evolution has forecast a declining cost profile over the next 3 years. The gold miner sees AISC falling to $1,125 to $1,185 per ounce by FY23.

On the production side, Evolution is forecasting a steady increase to 790,000 to 850,000 ounces by FY23.

This is all part of the miner’s strategy to have a portfolio of 6 to 8 assets “generating superior returns with an average mine life of at least 10 years”.

One of those is the Red Lake Mineral Resource in Ontario, Canada. Evolution Mining today said it estimated 48.08 million tonnes, grading at 7.10 grams per tonne from the site.

That would provide an estimated 11.0 million ounces of gold which is significantly higher than what was estimated and used as justification for the acquisition.

That’s another reason why I’d be watching the Evolution Mining share price in early trade today.

Foolish takeaway

Evolution Mining shares could be on the move in early trade. Today’s record result, targeted guidance and Red Lake update is sure to pique investors’ interest.

More reading

• ASX gold miners on watch after gold price crashes lower
• 5 things to watch on the ASX 200 on Tuesday
• Gold price tops US$2,000: What’s driving it higher and how can you benefit?
• ASX 200 Weekly Wrap: Surging commodity prices snap ASX 200’s losing streak
• 5 things to watch on the ASX 200 on Friday

Motley Fool contributor Ken Hall 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.

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The Qantas Airways Limited (ASX: QAN) share price recovery just got a little trickier even as it takes the dubious honour of being a rare capital raising loser.

It appears that Regional Express Holdings Ltd’s (ASX: REX) ambition to be a thorn in the side of Qantas took a big step forward.

The Australian Financial Review reported that the tiny regional shuttle is buying around 10 Boeing 737s from Virgin Australia Holdings Limited (ASX: VAH).

I’ll explain why this is something Qantas shareholders will want to keep a close eye on later.

Placement under water

While around 75% of S&P/ASX 200 Index (Index:^AXJO) companies that raised emergency funds during the COVID-19 crisis are trading well ahead of their placement price, the same can’t be said for Qantas.

Some examples in the 75% group include the Flight Centre Travel Group Ltd (ASX: FLT) share price and National Australia Bank Ltd. (ASX: NAB) share price.

Near monopolistic power eroded

But the cap raise is water under the bridge. The challenge that investors weren’t counting on facing as we flew into the COVID-19 pandemic was increasing competition.

In fact, Qantas supporters rejoiced when archrival Virgin became an early casualty of coronavirus and plunged into administration.

This should leave the Flying Kangaroo with near monopolistic power, even if the wounded Virgin were to be revived. As it turns out, Virgin is rising from the ashes, albeit as a shadow of its former self.

One competitor becomes two

But Qantas now has to fend off a new challenger in Rex, which is going after some of Qantas’ most profitable domestic routes.

Rex only used to fly to regional towns in small propeller aircraft. The COVID-19 crisis presented it with an opportunity to expand its business as the heavily restructured Virgin looked to sell its passenger jets.

The new fleet will allow Rex to offer flights connecting Australia’s major cities, including the highly profitable Melbourne-Sydney connection.

I suspect Rex may prove to be a formidable competitor to Qantas too given Rex’s track record in running a tight ship through good cost control.

Capital raising on the cards?

The other key question is whether Rex may also contemplate plying short-haul international routes that the Boeing 737s are well suited for.

There’s no word on how Rex plans to fund the aircraft purchase, although it’s reported that the small cap is looking at striking an aircraft leasing agreement. A cap raise is certainly not out of the question either.

More reading

• Northern Star share price falls 1.6% on trading update
• Breville share price on watch as dividends climb 10.8% higher
• Flight Centre share price on watch after achieving cash flow target
• 5 things to watch on the ASX 200 on Thursday
• ASX 200 drifts 0.1% lower, CBA reports solid FY20 result

Motley Fool contributor Brendon Lau owns shares of National Australia Bank Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia has recommended Flight Centre Travel Group Limited. 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.

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