Click here to see my original post on Rex.
It was a solid half year result for Rex. No surprises and my views are pretty much the same as my last post. A few points to highlight:
- The passenger and load factor increases were the main driver of the 60% increase in profit before tax. An illustration of this is the cost comparison between the prior comparable period (pcp). Total cost for 1HY18 only increased by $1.5 million from the pcp, whereas passenger revenue increased by $5.4 million.
- Based on seven months of operating statistics, it appears that after many many years of decreasing passenger numbers and load factors, there is a recovery underway.
- There is some seasonality in the business, the first half tends to be marginally more than the second half. The split is around 52:48, so I expect the second half results to fall marginally short of the first half.
- I see the new RPT win in WA being marginal. The Perth to Carnarvon and Monkey Mia route has combined annual passengers of less than 30,000. Perth to Albany and Esperance has combined passengers of 100,000 pa. These two new routes will still be helpful in defraying some of the fixed cost base at Perth.
In terms of outlook, management has flagged a 20% improvement in the full year result. These guys are pretty conservative so that number probably has a bit of buffer in it. Factors that may further improve the FY18 results include more charter revenue wins from an improving outlook in commodities (coal and copper), depreciation in the USD:AUD exchange rate leading to cheaper spare parts and possibly even fuel cost.