Helloworld Travel Limited

HLO Details

Helloworld Travel Limited (ASX: HLO) is a travel management service provider in Australia and New Zealand. Their services include retail travel networks, destination management, corporate travel management, wholesale travel, air ticket consolidation and online operations. The company has a market capitalisation of ~$282.15 million as on June 15, 2021.

Result Performance (Half-Year Ended 31 December 2020 – H1FY21)

For the first half ended 31 December 2020, revenues stood at $29.6 million, a decline of 85.2% on the prior comparative period (pcp). Reasons of decline in revenue could be mainly attributed to COVID-19 related restrictions which heavily impacted the entire hospitality and travel industry. Underlying operating costs declined by 76.2% YoY to $36.1 million reflecting the impact of reduced operating expenses and lower labour force. Underlying EBITDA for the period stood at -$6.5 million. Further, Loss After Tax for the period stood at $15.1 million, as compared to profit after tax of $22.7 million in pcp.

Key Data (Source: Company Reports)

Q3FY21 Update:

The TTV results for Q3FY21 stood at ~$261.5 million, down by 79.6% relative to Q3FY20. Despite this hit, March 2021 recorded the highest TTV of ~$112.5 million. Revenue for the period decreased by 75.8% YoY  to ~$15.0 million. Underlying EBITDA loss for the quarter increased to ~$4.4 million in Q3FY21 as compared to a loss of ~$2.7 million in Q2FY21.

At the end of Q3FY21, the company had a cash balance of $125.9 million. It had external borrowings of $81.0 million with available headroom on its debt facilities of $30.2 million.

Key Data (Source: Company Reports)

Outlook:

HLO expects favourable TTV levels, considering the open state borders across Australia and the commencement of quarantine free trans-Tasman travel. For FY21, HLO anticipates a ~$1.0 billion TTV and an underlying EBITDA loss of ~$14.0 million to ~16.0 million. After the opening of Australia state borders, trans-Tasman bubble and other limited international bubbles reopening in the second half of 2021, HLO seeks underlying EBITDA loss of ~$1.0 million to ~$3.0 million in Q1FY22 and positive underlying EBITDA in Q2FY22.

Key Risks:

The company is expected to be impacted by the risk of lockdowns and closed borders due to any forthcoming wave of COVID-19. Furthermore, intense competition in the tourism industry may drain significant market opportunities.

Valuation Methodology: EV/EBITDA Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

For several weeks, the stock while experiencing a low volatility, has been trading in the range provided by the 38.2% retracement level of $2.27 on the upside and the 23.6% retracement level of $1.64 on the downside. It has given a softer close for the ongoing week at $1.79. The technical indicator RSI with a reading around 41 suggests neutral momentum for the stock.

Going forward, the stock may have resistance around $2.27 whereas support could be around $1.64.

Stock Recommendation:

The company’s current ratio for H1FY21 stood at 1.26x, better than the industry median of 0.99x, implying that the company possesses better capabilities to meet its short-term obligations than its peer group. The stock declined by ~30.1% in 6 months. It has made a 52-week low and high of $1.490 and $3.360, respectively.

We have applied EV/EBITDA multiple based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a slight discount to EV/EBITDA Multiple (NTM)  (Peer Average) considering fall in revenue, intense competition as well as COVID-19 related risks.

Considering the aforesaid facts, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.790 per share, down by 1.649% on June 15, 2021.

Vortiv Limited

VOR Details

Vortiv Limited (ASX: VOR) is an Australia-based technology company. It invests and collaborates with businesses that have commercialized solutions in the digital, cybersecurity, analytics, and cloud services sector to jointly create value in opportunities. The market capitalisation of the company as of 15 June 2021 stood at ~$6.32 million.

Preliminary Result Performance (Year Ended 31 March 2021 – FY21)

Revenue of the company from ordinary activities for the full-year period stood at $99K against $4K of the previous year. The year also witnessed a decline in operating expenditure including D&A and finance costs by 30.2% which positively contributed to contraction in loss before tax from continuing operations for the year to $0.47 million from a loss of $0.67 million in the previous year. Net profit from continuing and discontinued operations for the year stood at $10.41 million as against $2.27 million in the previous year.

The Board of Directors declared a fully franked dividend of 5.55 cents per share.

Key Data (Source: Company Reports)

Outlook:

The management has estimated the sufficient cash inflow to meet all commitments and working capital requirements until H1FY22.

Key Risk:

The company has completed a technology upgradation programme, which increases the ATM asset largely funded by long-term borrowing, resulting in an increase of debt to $25 million. The company is facing challenges in the COVID-19 disruption, which might further impact the earnings of the company.

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

After a ‘Dragonfly Doji’ close in the previous week, the stock has given a weaker close for the ongoing week at $0.042. The technical indicator RSI with a reading around 53 and a curve at the end pointing down, suggests a softening of bullish momentum.

Going forward, the stock may have resistance around $0.048 whereas support could be around $0.035.

Stock Recommendation:

The company’s current ratio for FY21 stood at 2.84x, better than the industry median of 2.46x, implying that the company possesses better capabilities to meet its short-term obligations than its peer group.

The stock rose by ~18.66% in 6 months. It has made a 52-week low and high of $0.029 and $0.068, respectively.

Considering the aforesaid facts and current trading levels, we give a “Speculative Buy” rating on the stock at the current market price of $0.042 per share, down by 6.667% as on June 15, 2021.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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