Corporate Travel Management Ltd (ASX: CTD)

CTD Details

Enhanced performance and better outlook: Corporate Travel Management’s stock rallied about 10.4% in last one month (as at October 24, 2017) and is now trading at high levels while the group reinforced its positive outlook at the Annual General Meeting. With all regions performing strongly, growth was driven organically and through acquisitions. Efforts on expansion into the North American and UK markets with the acquisition of Travizon Travel and Redfern Travel and Andrew Jones Travel, have helped the group through 2017, wherein the revenue growth of 24.3% and statutory net profit after tax (“NPAT”) growth of 29.7% were reported. The acquisitions have also helped in enhancing the total assets to $740.2m at 30 June 2017 with a 29.4% rise from 30 June 2016. While CTD’s continued investment in innovative client facing technology, particularly with the introduction of CTM SMART Technology, and scaling up the presence in North America and Europe, will bolster growth; the group also expects that any boost from the general economic environment will further drive the performance. Exposure to a vast geographic patch is expected to drive sustainable performance as the group now expects over 70% of profit being emanating from outside of Australia. CTD expects its underlying EBITDA to be between $120 million to $125 million for FY18. We maintain a “Hold” on the stock at the current price of $23.68
 

FY18 Initiatives (Source: Company Reports)

Fletcher Building Ltd (ASX: FBU)

FBU Details

Facing headwinds in Buildings and Interiors (B+I) business:Fletcher Building resumed trading on October 26, 2017 and the stock slumped about 5% as the group provided a weak FY18 earnings guidance. The group has indicated that earnings guidance for the Buildings and Interiors (B+I) business reflects an updated management review of the portfolio and a loss of $160m is estimated for FY18 that comprises additional provisions of $125m for expected B+I project losses and $35m of expected B+I overhead costs in the current year 2017. Owing to the uncertainty in terms of outcomes of the major B+I projects, Fletcher Building provided a separate guidance of the B+I business from the remainder of the Group’s earnings. The group has also highlighted that low-growth at the back of resource constraints, wet weather in Q1, and anticipation of new government policy are few headwinds for FY18 in New Zealand, while Australia seems to be witnessing a flat market. Factors including normalisation of corporate costs in FY18, lower Land Development earnings from $54 million in FY17 to about $25 million per annum, and lower earnings for the Construction Division excluding B+I with limited backlog in South Pacific and very early-stage major projects in the Infrastructure business, are expected to impact the overall result. Looking at the performance in FY17, the group’s net earnings before items were down 23% and the trend does not seem to be reversing greatly in the medium term. Fletcher has now appointed Ross Taylor, (former head of engineering and construction company UGL) as its new chief executive. Given the shortcomings, we believe that the stock is “Expensive” at the current price of $6.84
 

FY18 Guidance (Source: Company Reports)

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