Pricing must have regard for Virgin’s structural disadvantage relative to Qantas, and the airline needs to show evidence of cost-cutting and a strong balance sheet.
that Virgin has put together an internal team to prepare a re-listing pitch, which will be in addition to the work private equity owner Bain Capital and its advisors will complete.Fund managers may take some convincing when it comes to this year’s most high profile float prospect, given investors haven’t seen a set of statutory results since it fell into administration at the height of the pandemic wave in 2020.
Nonetheless, the experience of the disastrous Virgin Blue IPO of 2003 is still fresh in many investors’ minds. Head of Australian equities at Equity Trustees, Chris Haynes, said the firm would consider investing in Virgin’s IPO if its valuation was strong enough relative to Qantas. Goldman Sachs on Tuesday reiterated its “buy” rating on Qantas, noting that the airline’s market capitalisation is 10 per cent above its pre-pandemic level but its enterprise value is 8 per cent below. “We believe the stock is not appropriately pricing Qantas’ improved earnings capacity,” argued Niraj Shah, analyst at Goldman Sachs.on the back of booming travel demand and widespread cost-cutting.
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