Webjet Limited

Significant Opportunity For WebBeds: Travel & hospitality sector company, Webjet Limited (ASX: WEB) has recently released a presentation titled “J.P. Morgan Emerging Companies Melbourne Conference.” As per the presentation, WebBeds is reported as world’s 2^nd largest and fastest growing accommodation supplier to the travel industry despite having less than 4% market share in the B2B market. It represents significant growth opportunities in the competitive landscape. It has built WebConnect to maximise customer connectivity while meaningfully reducing operating costs.

Strong Growth in TTV and Revenues for WebBeds:For WebBeds (B2B division), it reported an increase in TTV and revenue by 65% and 72% (pcp) to $1,036 Mn and $85.1 Mn in H1FY19, respectively predominantly due to increasing in bookings by 50% pcp to ~1,579K in H1FY19.


H1FY19 Financial Metrics for Webjet (Source: Company Reports)

What To Expect:The company’s WebBeds aims to deliver on its ‘8/4/4’ target by FY22- 8% revenue/TTV and 4% costs/TTV to drive 4% EBITDA/TTV. It is continuously targeting bookings growth of more than 5 times the underlying market in each of WebBeds markets. The company expects Umrah Holidays International to make a meaningful EBITDA contribution to WebBeds AMEA by FY 2022.

Stock Recommendation:Webjet’s share generated positive YTD return of 58.07%. Its gross margin, EBITDA margin, and net margin for H1FY19 stood at 100%, 29.7%, and 15.1% better than the data in H1FY18 at 35.6%, 9.9%, and 5.2% respectively, implying decent financial position of the company. Hence, considering the aforesaid parameters and decent outlook, we recommend a “Buy” rating on the stock at the current market price of $16.740 per share (down 0.298% on 26 April 2019).
 

Corporate Travel Management Limited

Appointment of New Chairman:Travel industry company, Corporate Travel Management Limited (ASX: CTD) recently announced that Mr. Ewen Crouch AM would be replacing Mr. Tony Bellas as Chairman.

Financials:It reported an increase in TTV by 19% to $4,958.3 million in FY18 as compared to FY17. It reported underlying EBITDA of $64.6 Mn in H1FY19, where 32% was contributed from Australia & NZ, 26% was contributed from North America, 24% from Europe and 18% from Asia.Operating cash conversion rolling 7-year average near 100%, through phase 1 and 2 expansion


Statutory EPS Growth (Source: Company Reports)

What to expect:The company has forecasted $6.5 Bn of TTV for FY19 as compared to $4,958.3 Mn in FY18. It has kept its underlying EBITDA guidance for FY19 at $150 Mn which is 20% up from the previous corresponding period. For FY20-21, it aims to target 15% organic growth per annum. The company is having a strong track record of strategy and execution which might attract the attention of market players.

Stock Recommendation:Corporate Travel’s share generated positive YTD return of 26.77% and is trading slightly below the average of 52 week high and low prices of $26.535. Its EBITDA margin and net margin for H1FY19 stood at 31% and 19.3% better than the industry median of 26.1% and 10.1% respectively, implying the decent financial position of the company than its peer group. Its current ratio for H1FY19 stood at 1.48x better than the industry median of 1.10x, which implies the company’s better ability to address its short-term obligations than its peer group.

Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $26.450 per share (down 2.001% on 26 April 2019).
 

Flight Centre Travel Group Limited

FLT Lowers Its FY19 PBT Guidance: Flight Centre Travel Group Limited (ASX: FLT) has recently announced a new update on its FY19 profit guidance. It anticipates first half trading pattern to continue into the second half, with sales tracking at record levels and the company again performing strongly in the corporate travel sector globally and in most key markets including the United States (USA), the United Kingdom (UK) and Asia.

Australian leisure results, however, have not yet recovered in line with expectations as subdued trading conditions have continued to impact total transaction value (TTV) in the lead-up to the key May-June trading period. In addition, losses in the “Other” segment of FLT’s accounts are expected to increase significantly during the second half, compared to the prior corresponding period, which will also offset the record profit contributions from FLT’s international businesses.
The company now believes underlying profit before tax (PBT) for the 12 months to June 30, 2019 is likely to be between $335 Mn and $360 Mn, below the $390 Mn-$420 Mn range it initially targeted when it released market guidance in October 2018.


FLT’s Historic Growth Data (Source: Company Reports)

Stock Recommendation:Flight Centre’s share generated negative YTD return of 3.68%. It is trading close to its 52 weeks low levels. Its gross margin for H1FY19 stood at 93.6% better than the industry median of 57.7%, implying the company’s better financial position than its peer group. Its current ratio for H1FY19 stands at 1.52x better than the industry median of 1.10x, implying its better ability to address its short-term obligations than its peer group.

Considering the recent reduction in the profit before tax guidance for FY19 and looking at current trading levels, we advise investors to have a close watch on the stock at the current market price of $39.000 per share (down 11.705% on 26 April 2019).  
 

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