Corporate Travel Management Limited

CTD Details 

TTV Increased 12% Year Over Year in 1HFY20: Corporate Travel Management Limited (ASX: CTD) is engaged in providing travel management services to the corporate market. As on 7 August 2020, market capitalization of the company stood at ~$997.36 million. On July 29, 2020, the company stated that Credit Suisse Holdings (Australia) Limited has ceased to be a substantial holder of the company, effective from 24 July 2020.

Market Update: In a recent update, the company indicated that it remains in a solid liquidity position amid COVID-19 outbreak. Further, its existing banking group has agreed to a waiver of all financial covenants for CY2020, which included the removal of COVID-19 from MAE definition. Total facility reduced to £100 million from £125 million. The terms of the facility are expected to remain through August 2022. As on 7 May 2020, net cash amounted to $30 million.

1H20 Financial Performance: During 1H20, the total transaction value of the company increased by 12% to $3,310.2 million and revenue witnessed an increase of 6% to $222.2 million. This reflects the strength and resilience of the business in the macro conditions.

1H20 Financial Performance (Source: Company Reports)

Key Risks: The company is exposed to certain types of business risks and market risks such as liquidity risks, credit risk, interest risks and foreign currency fluctuation risk. Further, the company is exposed to the risks and threats of Coronavirus. 

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

P/BV Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company gave negative returns of 47.56% over a period of six months and is currently trading below the average of its 52-week trading range of $4.355 - $23. The company has an annual dividend yield of 4.37%, with a price to earnings multiple of 12.38x on TTM basis. The company expects to report its FY20 results on 19 August 2020. CTD rides on client wins at consistently high levels. Considering the trading levels, decent financial performance, and decent liquidity position, we have valued the stock using a P/BV multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, we recommend a ‘Buy’ rating on the stock at the current market price of $9.74, up by 6.448% on 7 August 2020.

CTD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Ardent Leisure Group Limited

ALG Details 

ALG Financial Assistance for its Theme Park: Ardent Leisure Group Limited (ASX: ALG) is engaged in owning and operating theme parks and family entertainment centres. On 7 August 2020, the company stated that it has obtained financial assistance of $69.9 million from the Queensland Government for a period of three years. The financial assistance is received for its Theme Parks division under the Queensland Government’s COVID-19 Industry Support Package and Queensland Tourism Icons Program 2020.

ALG Inks a Deal RedBird Capital: On 15 June 2020, the company announced that RedBird Capital Partners will invest US$80 million into ALG’s U.S.-based subsidiary, which owns a 100% interest in Main Event Entertainment.  The deal was made to augment the financial flexibility of Main Event and position the company for future development.

1HFY20 Financial Highlights for the Period Ended 31 December 2019: For H1FY20, the company reported revenue of A$263.2 million, up from $226.7 million reported in 1HFY19. The company reported net loss after tax of A$22.5 million as compared to a loss of A$21.8 million reported in the prior corresponding period. EBITDA stood at A$44.2 million in 1HFY20, as compared to $0.2 million reported in 1HFY19. Main Event revenue grew by US$5.5 million on like over like basis, owing to 1% growth in constant centre revenue along with a contribution from two new centres opened in 1HFY20 and FY19. Theme park revenue came in at $38.7 million, up 4.9% from 1HFY19. The company exited the period with cash balance of A$57.9 million, along with drawn debt amounting to A$134.0 million

Financial Highlights (Source: Company Reports)

Outlook: Due to COVID-19 induced outbreak, the company has suspended its FY20 earnings guidance for Main Event. The rising ambiguity of COVID-19 has resulted in the decline in attendance and revenue at centres across the United States. As a result, the company expects Main Event’s EBITDA margin is to be below the 20% guidance provided previously.

Key Risks: Changes in law and regulatory government policies, increased costs, and resourcing demand are potential headwinds for the company. Stiff competition also adds to the company’s risk profile. 

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

P/BV Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of ALG has generated a return of 3.13% in the last three-months. However, the stock of the company gave negative returns of 14.29% in the last one month and is currently trading below the average of its 52-week trading range of $0.105 - $1.65. We have valued the stock using a P/BV multiple based illustrative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Considering the aforesaid facts, returns, product-pipeline, valuation, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.405, up 22.727% as on 7 August 2020. The increase in share price can primarily be attributed to recent financial assistance obtained by the company for a period of three-year along with RedBird Capital deal.

ALG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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