Stocks’ Details

Flight Centre Travel Group Limited

Decent Outlook but higher levels: Flight Centre Travel Group Limited (ASX: FLT) share price climbed up 3.8 per cent on July 11, 2018 at the back of positive market sentiments in relation to expecting better results for the full year, tentatively due on August 23, 2018. During the year, the company has completed several deals and events such as network consolidation which saw overall sales staff numbers decrease modestly, pointing to further productivity gains; the Transformation program that was initiated late in FY17 to ensure that the group achieves scalable profitable growth throughout the economic sale has started to gain momentum and the company made a solid progress towards its 7-2-100 targets in the first half, expanded international business, etc. Besides this, the court imposed a penalty of $12.5 Mn on the group in relation to the competition law test case, which was initiated by the ACCC in 2012. However, the management stated that this penalty will not affect FLT’s market guidance for FY18 on underlying profit before tax, thus revised the same upwardly in the range of $360 Mn-$385 Mn as compared to its initial target of $350 Mn-$380 Mn. Penalty will be included in the Group’s statutory results for the year. Meanwhile, it was seen that share price has increased in the past six months by 43.30 per cent (as at July 10, 2018). The stock is trading on a higher side and looks “Expensive” at the current market price of $ 64.610, which is inching towards the top end of its 52-week range.


5-Year Historical Performance (Source: Company Reports)
 

Qantas Airways Limited

Positioned for Growth and Sustainable Returns: Qantas Airways Limited (ASX: QAN) is an iconic Australian company and one of the best-performing airline groups in the world. The Group recorded strong performance in its trading update for the third quarter of FY18 and confirmed that they are on track to record underlying profit before tax for the full-year. Revenue from the operation of the company grew by 7.5 per cent to $4.25 Bn versus prior corresponding period (pcp) while Group Unit revenue (RASK) increased by 6 per cent as compared to same period last year. In the late March, the company took several important decisions in relation to changing its international network, for instance, the start of the Perth-London route, the switch from Dubai to Singapore as the hub for the group’s second London services and renewed partnership with Emirates that has seen Qantas increase its Trans-Tasman flying – ensuring significant benefits to Qantas International’s performance from FY19 onwards. As at 31 March 2018, the company had completed almost 50% market share buy-back event. The company focuses on to do strategic investment to provide Qantas loyalty with a path to deliver 7-10% EBIT CAGR over FY17-22E.


Qantas Loyalty EBIT ($M) (Source: Company Reports)

As at April 2018, the company had hedged circa 70% of its expected fuel cost for FY19 and holds noteworthy participation to fall in oil price. Moreover, the ongoing transformation along with capacity and revenue management strategy will support to mitigate the impact of higher fuel costs going forward. Based on foregoing, the group expects a full year underlying profit before tax of between $1.55 Bn and $1.60 Bn. As of now, the stock is trading at a reasonable PE level i.e., 12.58x. Hence, we maintain our “Buy” recommendation on the stock at the current market price of $ 6.540 (down by 1.4 per cent on July 11, 2018), considering robust outlook and sustainable return based on strong fundamentals and other developments such as synergistic joint ventures, renewed codeshare deal with several partners.
 

Sydney Airport

Improvement in Traffic Performance: Sydney Airport (ASX: SYD) disclosed its May month traffic performance in which total passenger traffic grew by 3.5% during the month of May compared to the prior corresponding period (pcp). This contains domestic traffic growth of 1.1% and international traffic growth of 5.6% on pcp basis. The domestic growth was mainly driven by a 0.9 per cent point improvement in load factors while it kept airline capacity as constant in the May month. Although, the group has experienced positive load factor and capacity due to increase in passengers traffic year on year across the globe wherein Vietnam, USA, India, China, and Hong Kong contributed to inbound passengers traffic (approximately 24.3%, 12.8%, 9.1%, 6.3%, and 6.3% respectively) in May’18. Moreover, International passenger growth was predominantly driven by the delivery of additional seat capacity. Further, the management expects that the same trend will be continued in 2018 and reaffirms its distribution guidance at 37.5 cents per securities for the full year. This represents a growth of 8.7% over 2017.


Sydney Airport Traffic Performance May 2018 (Source: Company Reports)

Besides this, the company has recently appointed Marianne Kopeinig to the Board as a co-company secretary of the company, effective from 28 May 2018. Meanwhile, the share price was up by 9.79 per cent in the past three months (as at July 10, 2018) but plunged 3.3% on July 11, 2018; and it is currently trading at high PE level reflecting to be slightly high in terms of the current price scenario. Hence, we maintain our “Expensive” recommendation on the stock at the current market price of $ 7.050.

 
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