Flight Centre Travel Group Limited

FLT Details

Reported 4.5% Growth in Total Transaction Value: Flight Centre Travel Group Limited (ASX: FLT) is a travel retail company, which has exposure in both the leisure and corporate travel sectors. The company operates as a tour operator, hotel management, destination management company.

FY19 Operational Highlights for the Period ended 30 June 2019: FLT announced its full-year operational results, wherein the company reported total revenue at $3,055 million, up 4.5% on y-o-y basis. Revenues were aided by improved total transaction value (TTV) across all geographic segments, essentially on the back of corporate brands. The business reported TTV of $23,728 million as compared to $21,818 million in FY18, reporting an 8.8% increase on a y-o-y basis. FLT reported an underlying PBT of $343 million as compared to $385 million in FY18. The company reported cash inflows from operating activities at $279 million in FY19.


FY19 Income Statement Highlights (Source: Company Reports)

Guidance: The company is targeting its underlying PBT for FY20 to be in the range of $310 million & $350 million. 1HFY20 underlying results are expected to be in the range of $90 million-$110 million. Upside cost is estimated to be roughly $10 million, while Bentours/Tempo collapse expenses of $5.5 million to $7 million are to be excluded from underlying results.

Valuation Methodology: Price to Cash Flow Based valuation

Price to Cash Flow based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock is quoting at $43.050 with a market capitalization of ~$4.43 billion. Currently, the stock is quoting near the average price of its 52-week low and high of $37.590 to $49.140. The stock has generated positive returns of 1.76% and 3.46% in the last three months and one year, respectively. The company expects robust growth from Americas corporate business in FY20. The company is also focused on increasing its investment in technology and prioritizing on cost reduction initiatives. Moreover, improved operational efficiencies coupled with further geographic expansion remains a key catalyst. Considering the current trading levels, improved TTV and business prospects, we have valued the stock using one relative valuation method, i.e., Price to Cash Flow multiple approach. For the said purpose, we have considered peers like Corporate Travel Management Ltd (ASX: CTD), Helloworld Travel Ltd (ASX: HLO), Webjet Ltd (ASX: WEB), etc., and arrived at a target price of lower double-digit upside (in percentage terms). Hence, we give a ‘Hold’ recommendation on the stock at the current market price of $43.050, down 1.824% as on 20 January 2020. 


FLT Daily Technical Chart (Source: Thomson Reuters)
 

Webjet Limited

WEB Details

Europ Reported the Highest Revenue Contributor:  Webjet Limited (ASX: WEB) provides a wide range of online travel booking service across flights, hotels, car hire, cruises, tours, etc. On 20 January 2020, the company reported the extension of the service contract of Mr. John Guscic for the position of Managing Director. The service contract has been extended from 30 June 2021 to 30 June 2023.

FY20 Operational Update: WEB declared its FY20 year-to-date update excluding any Thomas cook prior or current year contribution. The company witnessed TTV growth in the European segment depicting the largest market for the business. Within the Asia Pacific segment, the company reported significant growth and the segment is expected to deliver the highest bookings by region in FY20. The company is witnessing robust bookings growth in the Americas on the back of deeper penetration with important customers. However, the Middle East remains to be a difficult market environment.

FY19 Financial Highlights for the Period ended 30 June 2019: WEB declared its full-year results, wherein the company reported revenue of $366.4 million, up 26% on a y-o-y basis. TTV stood at $3,831 million, depicting a growth of 27% on a y-o-y basis. NPAT came in at $81.3 million, up 46% on a yearly basis.


FY19 Financial Highlights (Source: Company Reports)

Guidance: As per the FY20 guidance, the company expects underlying EBITDA to be between $157 million to $167 million, representing a growth of 26% to 34% over FY19. Organic EBITDA growth is expected to be in the range of 16% to 23%. For the first half of FY20, the company expects underlying EBITDA to be a minimum of $80 million. The company expects strong momentum from WebBeds with at least 25% organic EBITDA, while online republic EBITDA is expected to be lower than H1FY19 on account of restructuring costs.

Valuation Methodology: Price to Earnings based valuation

Price to Earnings based Valuation (Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of WEB is quoting at $14.300 with a market capitalization of ~$1.96 billion. Currently, the stock is quoting at the upper band of its 52-week trading range of $9.98 to $17.190. The stock has generated decent returns of 36.36% and 10.74% in the last three months and six months, respectively. Despite the tepid market outlook, the business holds the top position within the Middle-east segment. Considering the current trading levels, improved TTV and business prospects, we have valued the stock using one relative valuation method, i.e., Price to Earnings multiple approach. We have taken peers such as Corporate Travel Management Ltd (ASX: CTD), Helloworld Travel Ltd (ASX: HLO), Flight Centre Travel Group Ltd (ASX: FLT), etc., and arrived at a target price of a lower single-digit (in percentage terms). Hence, we recommend a ‘Hold’ rating on the stock at the current market price of $14.30, down 0.97% as on 20 January 2020. 

 
WEB Daily Technical Chart (Source: Thomson Reuters)

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