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Regional Express Holdings

ASX:REX
Snowflake Description

Flawless balance sheet established dividend payer.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
REX
ASX
A$154M
Market Cap
  1. Home
  2. AU
  3. Transportation
2017/12/16
Company description

Regional Express Holdings Limited, together with its subsidiaries, engages in the air transportation of passengers and freight in Australia. More info.


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  • Regional Express Holdings is covered by less than 3 analysts.
SHARE PRICE
3 Month History
REX
Industry
5yr Volatility vs Market

Value

 Is Regional Express Holdings undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Regional Express Holdings to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

Current Discount
Amount off the current price Regional Express Holdings is available for.
Intrinsic value
13%
Share price is A$1.43 vs Future cash flow value of A$1.65
Current Discount Checks
For Regional Express Holdings to be considered undervalued it must be available for at least 20% below the current price. Less than 40% is even better.
  • Regional Express Holdings's share price is below the future cash flow value, but not at a moderate discount (< 20%).
  • Regional Express Holdings's share price is below the future cash flow value, but not at a substantial discount (< 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Regional Express Holdings's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Regional Express Holdings's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Regional Express Holdings is overvalued based on earnings compared to the Global Airlines industry average.
  • Regional Express Holdings is good value based on earnings compared to the AU market.
Price based on expected Growth
Does Regional Express Holdings's expected growth come at a high price?
  • Regional Express Holdings is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on Regional Express Holdings's assets?
  • Regional Express Holdings is good value based on assets compared to the Global Airlines industry average.
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Value checks
We assess Regional Express Holdings's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Airlines industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Airlines industry average (and greater than 0)? (1 check)
  5. Regional Express Holdings has a total score of 2/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (22.83%).

    Full details on the Value part of the Simply Wall St company analysis model.
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Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for Regional Express Holdings is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
A$46

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = A$11 × (1 + 2.76%) ÷ (8.55% – 2.76%)

Terminal value based on the Perpetuity Method where growth (g) = 2.76%:
A$197

Present value of terminal value:
A$131

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
A$177 = A$46 + A$131

Value = Total value / Shares Outstanding (A$177 / 107)

Discount to Share Price

Value per share:
A$1.65

Current discount (share price of A$1.43): 13.18%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 8.55% = 2.76% + (0.8 * 7.24%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value (A$153,566,174).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

0.413 = 0.372 (1 + (1- 30%) (15.39%))

Levered Beta used in calculation = 0.8



Assumptions
  1. The risk free rate of 2.76% is from the 10 year government bond rate in AUD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.24%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Regional Express Holdings expected to perform in the next 1 to 3 years based on estimates from 1 analyst?

  • Regional Express Holdings is covered by less than 3 analysts.
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
4%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is Regional Express Holdings expected to grow at an attractive rate?
  • Regional Express Holdings's earnings growth is positive but not above the low risk savings rate of 4.6%.
Growth vs Market Checks
  • Regional Express Holdings's earnings growth is positive but not above the AU market average.
  • Regional Express Holdings's revenue growth is positive but not above the AU market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • Regional Express Holdings's earnings are expected to grow by 4% yearly, however this is not considered high growth (20% yearly).
  • Regional Express Holdings's revenue is expected to grow by 2.1% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • Regional Express Holdings is not expected to perform strongly, Return on Equity (ROE) in 3 years is estimated to be below 20%.

Improvement & Relative to industry
  • Performance (ROE) is expected to be below the current Global Airlines industry average.
  • An improvement in Regional Express Holdings's performance (ROE) is expected over the next 3 years.
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Future performance checks
We assess Regional Express Holdings's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the AU market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the AU market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Regional Express Holdings has a total score of 0/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has Regional Express Holdings performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Regional Express Holdings's growth in the last year to its industry (Airlines).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Regional Express Holdings's year on year growth rate is negative over the past 5 years, however the most recent earnings are above average.
  • Regional Express Holdings has been loss making last year but is now profitable.
  • Regional Express Holdings has become profitable in the last year making it difficult to compare the industry average.
Earnings and Revenue History
Regional Express Holdings's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Poor return on shareholders funds (ROE < 20%) last year.
  • Regional Express Holdings performed worse than the Global Airlines industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has improved significantly over 3 years.
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Past performance checks
We assess Regional Express Holdings's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Airlines industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Regional Express Holdings has a total score of 1/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Regional Express Holdings's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up Regional Express Holdings's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • Regional Express Holdings is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • Regional Express Holdings's cash and other short term assets cover its long term commitments.
Balance sheet
This treemap shows a more detailed breakdown of Regional Express Holdings's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • High level of stock/ inventory/ unsold assets.
  • Total debt is covered by total short term assets, assets are 2.6x debt.
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • Regional Express Holdings's level of debt (12% of total debt) compared to net worth is satisfactory (less than 40%).
  • The level of debt compared to net worth has been reduced over the past 5 years (15.4% vs 12% today).
  • Total debt is well covered by annual operating cash flow (110.5%, greater than 20% of total debt).
  • Interest on debt is well covered by earnings (EBIT is 15.4x coverage).
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Financial health checks
We assess Regional Express Holdings's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. Regional Express Holdings has a total score of 6/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is Regional Express Holdings's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
6.99%
Current annual income from Regional Express Holdings dividends. Estimated to be 5.85% next year.
If you bought A$2,000 of Regional Express Holdings shares you are expected to receive A$140 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Paying above low risk savings rate (3%).
  • Paying above markets top dividend payers (4.92%).
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Dividends per share have been volatile in the past 10 years (annual drop of over 20%).
  • Dividends per share have increased over the past 10 years.
Current Payout to shareholders
What portion of Regional Express Holdings's earnings are paid to the shareholders as a dividend.
  • Dividends paid are covered by net profit (1.2x coverage).
Future Payout to shareholders
  • Dividends after 3 years are expected to be covered by net profit (1.7x coverage).
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Income/ dividend checks
We assess Regional Express Holdings's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can Regional Express Holdings afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. Regional Express Holdings has a total score of 5/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of Regional Express Holdings's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
  • Regional Express Holdings has no CEO, or we have no data on them.
Management Team Tenure

Average tenure of the Regional Express Holdings management team in years:

5.6
Average Tenure
  • The average tenure for the Regional Express Holdings management team is over 5 years, this suggests they are a seasoned and experienced team.
Management Team

Kim Hai Lim

TITLE
Executive Chairman

Neville Howell

TITLE
COO & Executive Director
COMPENSATION
A$261K
TENURE
3.4 yrs

Mayooran Thanabalasingam

TITLE
General Manager of Information Technology & Communications
COMPENSATION
A$219K
TENURE
9.4 yrs

Warrick Lodge

TITLE
General Manager of Network Strategy & Sales
COMPENSATION
A$214K

Paul Fisher

TITLE
GM of Flight Operations & Chief Pilot
COMPENSATION
A$244K
TENURE
3.4 yrs

Irwin Tan

TITLE
GM of Corporate Services & Company Secretary
COMPENSATION
A$230K
TENURE
12.3 yrs

Chris Hine

TITLE
Group Flight Operations Advisor & Executive Director
COMPENSATION
A$152K
TENURE
2.6 yrs

Png Tat

TITLE
General Manager of Engineering
COMPENSATION
A$203K
TENURE
1.9 yrs

Mark Burgess

TITLE
Deputy General Manager of Engineering
COMPENSATION
A$175K
TENURE
1.7 yrs

Benjamin Ng

TITLE
Company Secretary
TENURE
10.2 yrs
Board of Directors Tenure

Average tenure and age of the Regional Express Holdings board of directors in years:

10.3
Average Tenure
63
Average Age
  • The average tenure for the Regional Express Holdings board of directors is over 10 years, this suggests they are a seasoned and experienced board.
Board of Directors

Kim Hai Lim

TITLE
Executive Chairman
TENURE
14.5 yrs

John Sharp

TITLE
Deputy Chairman
COMPENSATION
A$99K
AGE
62
TENURE
12.7 yrs

Neville Howell

TITLE
COO & Executive Director
COMPENSATION
A$261K
TENURE
3.4 yrs

Chris Hine

TITLE
Group Flight Operations Advisor & Executive Director
COMPENSATION
A$152K
TENURE
6.8 yrs

Ron Bartsch

TITLE
Independent Director
COMPENSATION
A$38K
TENURE
7.1 yrs

Jim Davis

TITLE
Independent Director
COMPENSATION
A$44K
AGE
65
TENURE
13.3 yrs

Thian Soo Lee

TITLE
Non-Executive Director
COMPENSATION
A$30K
AGE
62
TENURE
14.5 yrs
Recent Insider Trading
  • Regional Express Holdings insiders have only sold shares in the past 3 months.
Who owns this company?
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Management checks
We assess Regional Express Holdings's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. Regional Express Holdings has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

Regional Express Holdings Limited, together with its subsidiaries, engages in the air transportation of passengers and freight in Australia. The company operates through Regular Public Transport and Charter segments. It provides defense and government related aviation support services; aero-medical services for ambulance Victoria; fly in/fly out charter services; express freight services; and air tours charter services. The company also offers training programs to students and other airlines. As of September 22, 2017, it operated a fleet of approximately 50 Saab 340 aircraft to 59 destinations in Australia. The company was formerly known as Australiawide Airlines Limited. Regional Express Holdings Limited is based in Mascot, Australia.

Details
Name: Regional Express Holdings Limited
Ticker: REX
Exchange: ASX
Founded:
Market Cap: A$153,566,174
Shares outstanding: 107,388,933
Website: http://www.rex.com.au
Address: Regional Express Holdings Limited
81-83 Baxter Road,
Mascot,
New South Wales, 2020,
Australia
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
ASX REX Ordinary Shares Australian Securities Exchange AU AUD 09. Nov 2005
CHIA REX Ordinary Shares Chi-X Australia AU AUD 09. Nov 2005
Number of employees
Current staff
Staff numbers
0
Regional Express Holdings employees.
Industry
Industry: Airlines
Sector: Transportation