Flight Centre Travel Group Limited

Fall in income margin but revenues increased: Flight Centre Travel Group Limited (ASX: FLT) ended FY 2018 with total transaction volumes or TTV amounting to $21.8 billion which implies the YoY growth of 9%. The company garnered revenues amounting to $2.9 billion reflecting YoY growth of 6.5%. Its income margin stood at 13.52% in FY 2018 which implies a fall of 25 bps (basis points) mainly due to changes in the business mix as approximately 30% of the total transaction volumes have been garnered from the businesses which generates lower income margin.

 
FLT’s total transaction volumes (Source: Company Presentation)

However, the company has been successful in managing its costs and this somewhat also helped the decline in the income margin. Flight Centre ended FY 2018 with trade and other receivables amounting to $845 million implying the YoY growth of 11% thanks to the heightened corporate volumes as well as acquisitions. Also, the company’s management is highly optimistic about the performance in the international markets. In FY 2018, it generated 49% of the total transaction volume from the international markets.

Flight Centre to continue Generating Higher Offshore Revenues: The management of Flight Centre would continue reflecting favorable views for the offshore revenues which it managed to generate in FY 2018. In FY 2019, the management believes that it would generate 50% or more of the sales from the international markets. Thus, it can be said the company is not entirely dependent for the revenues on the domestic markets (Australia).

In the six months ending on December 31, 2018, Flight Centre is expected to post profit before tax or PBT in the range of $140 million- $150 million. However, in FY 2019, it expected to report PBT in the range of $390 million- $420 million, and this has been below market’s expectation. The company’s management stated that moving forward the travel market would be witnessing the favorable momentum which could possibly help the company in driving growth. The increased oil prices might weigh on the airfare prices.

Technical Overview: Moving average convergence divergence or MACD has been applied on the daily chart of Flight Centre by using the default values. As per the observation, the MACD line is expected to cross the signal line and might move downwards i.e. the stock might experience bearish momentum. Hence, at the current price levels of $ 46.080 (down 9.98% on October 22, 2018), the stock can be avoided.

Corporate Travel Management Limited

FY 2018 Performance underpinned by organic growth: Corporate Travel Management Limited (ASX: CTD) ended FY 2018 with total transaction volumes amounting to $4.9 billion which implies an increase of 19% on prior corresponding period. During the same period, the company witnessed EBITDA growth of 27% on the prior corresponding period to $125.4 million on the heels of the robust organic growth. The company recorded robust momentum in the client retentions as well as wins. However, the company also witnessed the marginal positive impact from the inorganic growth (i.e. growth from the merger and acquisitions) in FY 2018.


CTD’s EBITDA (Source: Company Presentation)

During the same period, the company recorded revenues amounting to $371 million implying the YoY growth of 14%. The company has garnered the highest proportion of the revenues from the North America region. This region has contributed $127 million.

Higher Client Activities Would Stem CTD’s Future: In Australia and New Zealand region, Corporate Travel has been encountering the robust client activities which is expected to shape the company’s future. The company is also optimistic about the SMART Corporate Travel launch which is to help the SME segment.

From the Asia region, increased client activity has been witnessed amidst flat ticket prices. The management believes that Lotus acquisition would help the company moving forward.

The company is expected to benefit from Europe region on the back of robust EBITDA growth because of the increased market share. However, from this region, it would also eye on the M&A opportunities.

From the North America region, Corporate Travel would be expected to encounter favorable momentum in regard to the top line which would be underpinned by the client wins. However, from this region also, it would also be considering the M&A opportunities.

Technical Overview: Relative Strength Index or RSI has been applied on the daily chart of Corporate Travel Management by considering the default values. After careful observation, it was understood that the 14-day RSI is near its oversold region. As a result, we expect a rebound from the current levels. Therefore, we maintain “Hold” rating on the stock at the current level of $ 27.600.

Webjet Limited

Robust growth across financial numbers: Webjet Limited (ASX: WEB) ended FY 2018 by witnessing robust growth momentum across the core financial metrics. During the same period, the company saw YoY growth of 10% in the number of bookings. In FY 2018, the company’s total transaction volumes amounted to $1.3 billion reflecting a rise of 14% on the YoY basis. The whopping 36% YoY growth was witnessed in the company’s EBITDA to $58.7 million on the back of ancillary products as well as scale.

Growth in ancillary products (Source: Company Presentation)

In FY 2018, Webjet was aided by the technological advancements which has led to the favorable momentum in the cross-selling of the ancillary products. The management stated that the ancillary products has been outpacing the growth momentum which has been seen in the flights. The company has been achieving the pre-set growth targets in respect of the flight bookings in FY 2018.

Robust Growth expected in B2B and B2C markets: The management of Webjet Limited is having a favorable outlook. The management stated that ample number of opportunities prevail with respect to B2B as well as B2C markets which are yet to be tapped. Exploiting these untapped growth opportunities would help the company in witnessing the favorable momentum.

In respect to the B2C growth target, the company is expected to witness booking growth of over 3x of the broader market growth rate within the time span of 3 years. However, with respect to the B2B growth target, it might witness the bookings growth of over 5x of the market growth in regard to each market within the same time span i.e. 3 years.

Technical Overview: MACD indicator has been applied on the daily chart of Webjet Limited by using the default values. As per the observation, MACD line has just crossed the signal line and it would still be early to comment on the direction of the moving averages. Thus, we suggest to wait and watch the stock at the current price levels ($ 13.560).
 
 

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