Helloworld Travel Limited

HLO Details

Acquisition of TravelEdge Group:  Helloworld Travel Limited (ASX: HLO) is a retail, wholesale and corporate travel company, which has a market capitalisation of ~A$579.95 Mn as on 27^th September 2019. Recently, the company, through a release dated 24^th September 2019 announced that it has agreed to acquire the TravelEdge Group, which is one of Australia’s leading privately-owned corporate travel management company. The consideration for the acquisition amounted to $28.0 Mn, which would be financed from a new bank facility. It was also mentioned that there is potential for additional consideration to the vendors in FY21 in the event of certain defined earnings thresholds in FY20 being satisfied. The acquisition would be earnings accretive in FY20 and beyond. The consideration reflects an FY19 EBITDA multiple of around 6 times.

For the year ended 30^th June 2019, the company witnessed a growth of 9.1% in total transaction value and the figure stood at $6,511 million.It reported revenue growth of $31.9 Mn to $357.6 Mn led by business expansion and solid trading performances from existing operations. The company further added that it has delivered another year of profitable growth with EBITDA amounting to $77.3 Mn, reflecting a rise of 20.8% or $13.3 Mn against the prior year.


 Group Revenue (Source: Company Reports)

What to Expect:In the release dated 17^th September 2019, the company stated that following on from the finalisation of its major FY20 commercial agreements, which include new GDS contracts, the EBITDA guidance happens to be in the ambit of $83 Mn to $87 Mn for the year ending 30 June 2020, which is subject to no material change in trading conditions. HLO added that it is in a very strong position to continue the businesses momentum and achieve its targets in the year ahead.

Stock Recommendation: The company declared final dividend (fully franked) amounting to 12.5 cps, which takes the total declared dividends for FY19 to 20.5 cps (fully franked). This reflects a rise of 13.9% in comparison to the prior year. During FY19, it has increased investment in the development of enhanced technology solutions, network expansion, and marketing initiatives. The net margin of the company stood at 10.7% in FY19 as compared to the industry median of 9.2%. This implies that the company is having better capabilities to convert its topline into the bottom against the broader industry. On the stock’s performance front, it produced returns of 6.16% and 8.14% in the time span of one month and six months, respectively. Currently, the stock is priced close to its 52-week low level of $4.00 with PE multiple of 14.76x and an annual dividend yield of 4.41%. Hence, considering the above-stated facts, we give a “Buy” recommendation on the stock at the current market price of A$4.630 per share (down 0.43% on 27^th September 2019).

 
HLO Daily Technical Chart (Source: Thomson Reuters)
 

BINGO Industries Limited

BIN Details

Sale of Banksmeadow facility:BINGO Industries Limited (ASX: BIN) provides waste management solutions for domestic and commercial businesses. It has a market capitalisation of ~A$1.5 Bn as on 27^th September 2019. In an update, the company announced that it has agreed to sell its Banksmeadow facility in consideration of $50 Mn to CPE Capital, formerly known as CHAMP Private Equity. It stated that CPE Capital has been approved as the purchaser of the Banksmeadow facility by the Australian Competition and Consumer Commission. The company anticipates wrapping up the sale before 9^th October 2019.

For the 12 months ended 30^th June 2019, net revenue of the company stood at $402.2 Mn with a rise of 32.4%.The underlying EBITDA amounted to $106.1 Mn, reflecting an increase of 13.2%. Underlying EBITDA was in accordance with the guidance, comprising $92.5 Mn in EBITDA from the BINGO business and $13.6 million EBITDA from Dial a Dump Industries.


Financial Performance (Source: Company Reports)

Future Prospects:The company stated that it is well-positioned for growth in FY20 with a full-year contribution from DADI, Patons Lane and West Melbourne. It is focused on delivering organic growth and margin expansion over the next 12 months. BIN is on track to deliver annualised cost synergies amounting to $15 million over two years from FY20. It added that the network reconfiguration plan is well advanced and anticipated to return $80 Mn via the sale of non-core assets and Banksmeadowin FY20.

Stock Recommendation:As per the release of FY19 results, the company made significant progress in its redevelopment program with the delivery of its first recycling centre in Victoria. The Board of the company has declared a final dividend amounting to 2.0 cps. Together with half-year dividend of 1.72 cents paid in March 2019, this takes the total dividend for the year to 3.72 cps. The asset to equity ratio of the company stood at 1.62x in FY19 as compared to the industry median of 2.29x. Therefore, in light of above-stated facts and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$2.200 per share (down 3.509% on 27^th September 2019).

 
BIN Daily Technical Chart (Source: Thomson Reuters)

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