Flight Centre Travel Group Limited (ASX: FLT)

FLT Details

Benefitting from global footprint: Flight Centre Travel Group is seen to regain some positive momentum with a 4.25% rise on January 19, 2018. Recently, BlackRock Group became a substantial holder of Flight Centre Travel Group by holding 5,058,198 shares with 5% of the voting power. FLT had achieved $329.5 million of FY17 underlying PBT and this is the 21^st year of the growth in 22 years since it has been listed. There was an increase of $9m in D&A expense which reflected a higher capital expenditure in the recent years and there was decline in 30 bps in underlying revenue margin which was due to change in business mix. On the other hand, FLT generated $295.4 million of operating cash inflow during FY17 and returned $140.4 million to the shareholders via fully franked interim and final dividends.

It achieved 6.4% TTV (total transaction volume) growth during 2H FY17 and 1.8% of growth during 1H FY17. Its dividend yield of 2.9% is not very high, but its pay-out ratio is 60% which looks sustainable. As far as FY18 is concerned, 1H PBT results have been proposed to be in line with expectations with 6-19% growth on H1 FY17 and full year underlying PBT is expected to be up 6.2-15.6%.
 
 
Sales Growth Trend (Source: Company Reports)
 
A rebound is expected during 2H of FY18 as the group aims to benefit from the expansion into 8 new countries during FY17 alone as compared to past 3 years where it expanded in 12 countries. It expects less than $100 million of cost growth in constant currency during FY18. The group aims to expand its core business into leisure travel retail, corporate travel and in-destination travel across its major geographies while its productivity growth has enabled it to grow sales in a more efficient manner. Meanwhile, the stock price rose by 6.55% in the past six months (as at January 18, 2018) and we recommend a “Hold” at the current price of $48.83
 

FLT Daily Chart (Source: Thomson Reuters)
 

Qantas Airways Limited (ASX: QAN)

QAN Details

Advantage from expansion efforts: Recently, Qantas confirmed that reconciliation of foreign persons potentially holding a relevant interest in the company indicates a percentage figure of 43.60% of the issued share capital of Qantas. On the other hand, QAN had lately highlighted about higher competitive capacity to impact the performance slightly while its Q1 FY18 trading update signalled for having a half year underlying profit before tax to be above that of 1H FY17 at the back of increased group capacity. While some hiccups are expected in the second half at the back of sluggish unit revenue growth in domestic, expansion in international capacity and growth expected from Asian markets are indicated to help the stock get some momentum on this front. During 2016-17, it opened and expanded into new markets, including Sydney-Beijing and Melbourne-Ho Chi Minh and added more capacity on its existing routes.
 

Shareholders Return Pattern (Source: Company Reports)
 
It is noteworthy that QAN reported an Underlying Profit Before Tax of $1,401 million in FY17 which is the second highest performance in its 97-year history and a total of $627 million was distributed to its shareholders through share buy-back and ordinary dividends. It is also now accelerating the rollout of its flight Wi-Fi service across domestic A330 and 737 aircrafts. The share price lowered by 20.5% in past three months but was up 2.95% on January 19, 2018, and with group’s expansion on track with any favourable oil price scenario, the stock can propel higher. We recommend a “Buy” on the stock at the current price of $5.23


QAN Daily Chart (Source: Thomson Reuters)
 

Corporate Travel Management Limited (ASX: CTD)

CTD Details

Long-term growth prospects:Sale of 1.165m shares at $23 per share by the managing director, Jamie Pherous had raised some eyebrows with regards to group performance. In fact, the Company’s shares were down by 13% in last three months from their 52-week high and this was due to an offload of almost 1.2 million of shares during the period.

On the other hand, the travel statistics indicate that the group will benefit from its position in Australia and other geographies. Group’s FY17 underlying EBITDA went up by 43% and reached $98.6m and its full year franked dividend went up by 25% and reached to 30 cents. It also reflected a strong organic growth which underpins its EBITDA performance with customer retention at a higher level.
 

EBITDA Growth Summary (Source: Company Reports)
 
Based on healthy fundamentals, CTD has continued to outperform in its local and in global segments. Its diluted EPS CAGR has been 34% in the 7-year history.CTD is expected to benefit from position in the USA and Europe with an aim to enhance its current market share of less than 1% in each region, and with better acquisition opportunities. The group expects 22-27.5% growth in FY18 underlying EBITDA over FY17 (excluding any acquisitions). We recommend a “Hold” at the current price of $20.04
 

CTD Daily Chart (Source: Thomson Reuters)
 

Webjet Limited (ASX: WEB)

WEB Details

Softness in guidance: WEB’s WebBeds has been highlighted as the fastest growing B2B Player with an aim to gain the market share in each region of operation and it continues to outperform its underlying market growth sales. It also acquired JacTravel that provided an opportunity to reduce its costs globally. Its agreement with Thomas Cook is on track and its revenue sharing will begin from 1, June 2019. As far as its performance is concerned in Middle East, it continues to build a good share and continues to focus on its global chains in Americas as well. Few of the acquisitions are in pipeline with growing markets in UK, Spain, Germany, Italy, and Eastern Europe. Its focus is completely on Wholesalers, Tour Operators and on its OTA clients in all the markets. Partnerships with Dida Travel also yielded success as there was a good cross-selling between the companies. Last three months have been very volatile for Webjet with a 9.9% dip (as at January 18, 2018) along with its FY18 guidance below expectations based on one-off impact of JacTravel acquisition, taxes in relation to Online Republic and FIT Ruums losses.Given the scenario, the stock looks “Expensive” at the current price of $10.07
 

WEB Daily Chart (Source: Thomson Reuters)

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