Stocks’ Details

Webjet Limited

WebBeds Becomes the Largest Business By EBITDA: Webjet Limited (ASX: WEB) is engaged in the online sale of travel products, including flights and hotel rooms. The group comprises of a B2B division named, WebBeds and a B2B division, Webjet OTA and Online Republic.

FY20 Results to be Impacted by Thomas Cook’s Compulsory Liquidation: Thomas Cook is a customer of Webjet Limited’s WebBeds B2B business. The company will lose the total transaction value (TTV) from Thomas Cook, which was expected to be in the range of $150 million - $200 million in FY20. The outstanding receivables of EUR 27 million owed by Thomas Cook, will be treated as a one-off expense to the income statement. The company has over 3,000 hotel contracts acquired from Thomas Cook in August 2016, which will not be impacted. WebBeds business was expected to earn an additional $27 million to $33 million of EBITDA in FY20 from a range of drivers including Thomas Cook.However, Thomas Cook’s collapse is likely to reduce this expectation by up to $7 million in EBITDA. Other expected earnings drivers for FY20 remains unchanged.

Director’s Interest and Shareholding: The company recently announced that Brad Holman, one of the Directors, acquired 8,000 shares for a total consideration of $97,440. In another announcement, the company updated that the voting power of UBS Group AG reduced to 6.64% from 7.88% earlier.

Dividend:The company declared a dividend of AUD 0.1350 per ordinary share, which is payable on 10 October 2019.

FY19 Results Highlights: During the year, the company’s total transaction value (TTV) stood at $3.8 billion, increasing 27% on prior year. Revenue for the year amounted to $366.4 million, up 26% on prior corresponding year. During the year, the company reported EBITDA of $124.6 million, rising 43% on pcp. NPAT for the period stood at $81.3 million, representing an increase of 46% on prior corresponding period.


FY19 Financial Highlights (Source: Company Reports)

What to Expect: On the outlook front, the company has a strong pipeline of acquisition opportunities in the future. The company sees significant opportunities for profitable growth in all markets for WebBeds. Webjet OTA has above market growth opportunities across both domestic and international flights. Guidance for FY20 will be provided in the AGM to be held on 20 November 2019.

Stock Recommendation: The stock of the company generated negative returns of 15.12% and 21.65% over a period of 1 month and 3 months, respectively. The company saw a strong start to FY20 with WebBeds TTV rising more than 50% over pcp. Webjet OTA and Online Republic also witnessed a TTV growth of 9% and 4%, respectively. WebBeds became the largest business by EBITDA with more than 100% increase in a time span of 2 years. By FY22, the company expects to deliver an EBITDA margin of 50% for WebBeds, with 8/4/4 profitability target implying 8% revenue/TTV and 4% costs/TTV to drive 4% EBITDA/TTV. Based on the above factors, we give a “Hold” recommendation on the stock at the current market price of $11.110, down 3.475% on 23 September 2019.
 

Flight Centre Travel Group Limited

FY19 Proved to be Another Year of Record Sales:Flight Centre Travel Group Limited (ASX:FLT) is primarily engaged in travel retailing in both the leisure and corporate travel sectors. The company recently acquired the rapidly growing Gold Coast-based Ignite Travel Group. The company previously held a 49% stake in the company.

Dividend:The company recently declared a dividend of AUD 0.9800 per ordinary share to be paid on 11 October 2019.

FY19 Results: During the year, the company reported a total transaction value of $23.7 billion, that exceeded the FY18 record of $2 billion. Profit for the period was reported at $343.1 million. The company’s overseas businesses generated more than half of the total transaction value & profit before tax. Americas business was the major driver of international growth. The region delivered PBT amounting to $102.5 million, that was more than FY18’s record PBT of $71.2 million.


FY19 Profit & Loss (Source: Company Presentation)

Outlook: The company’s results in FY20 will be driven by the company’s corporate and international businesses, with improvement anticipated in Australia. The Americas business is expected to report a strong growth in the future.
Stock Recommendation: The stock generated returns of 14.86% over a period of 6 months. In FY19, the company achieved a new milestone for total transaction value of $23.7 billion. The corporate sector reported TTV growth of 15.2% globally with continued out-performance, developing strong foundations for the future. The Americas business was a highlight with PBT increasing by 44.4% over FY18. The company has a price earnings ratio of $18.140, which is higher than the industry median of 17.6x Currently, the stock is trading slightly towards its 52-week high level of $53.997. Given the backdrop of the above factors, we give an “Expensive” recommendation on the stock at the current market price of $47.820, up 0.78% on 23 September 2019.
 

Virgin Australia Holdings Limited

Subdued Revenue Growth in H2FY19:Virgin Australia Holdings Limited (ASX: VAH) is engaged in the operation of a domestic and international passenger and cargo airline business & a loyalty program. The company recently updated that it is negotiations with Connectivity Pte Ltd (Affinity) to buy back its investment in Velocity Frequent Flyer Holdco Pty Ltd (Velocity). Affinity holds 35% minority investment in Velocity. Virgin Australia is willing to buy the stake for $700 million, which is expected to take place before the end of 2019.

FY19 Results: During the year, group total revenue amounted to $5.8 billion, up 7.6% on prior corresponding period. Group underlying loss before tax was reported at $71.2 million due to adverse market conditions in H2FY19, new route investments & fuel and foreign exchange headwinds amounting to $158.8 million. During the year, the group generated positive free cash flow of $53.9 million, down $19.2 million on FY18.


Financial Results (Source: Company Reports)

Outlook: As the company entered FY20, it has seen a continuation of softer conditions experienced in H2FY19. The company’s business improvement initiatives are expected to be realised during FY20. With continued focus on disciplined capacity and network management, the group expects capacity to be further reduced in H1FY20. In addition, further headwinds of approximately $100.0 million in fuel and foreign exchange are also expected in FY20.
Stock Recommendation: Over a period of 6 months, the stock generated a negative return of 15.79%. In FY19, the company’s performance was hit by a challenging trading environment in H2FY19, increasing costs and investment in Trans-Tasman routes, following the cessation of the Air New Zealand alliance. Moreover, the result was affected by an increase of 10.7% in depreciation charges. The company is now responding to the above challenges with improvement initiatives, including a simplified organisational structure, fleet and network capacity review, organisational rightsizing program and a group-wide review of supplier contracts. We suggest investors to watch the stock that how the new initiatives head towards the underlying purposes of streamlining operations and reducing costs. Hence, we have a wait and watch stance on the stock at the current market price of $0.165, up 3.125% on 23 September 2019.
 

Corporate Travel Management Limited

FY19 TTV Growth at 30%:Corporate Travel Management Limited (ASX: CTD) is engaged in managing the purchase and delivery of travel services for its clients.The company recently updated that the voting power of Bennelong Australian Equity Partners Ltd increased from 7.5666% to 9.6667%. As per another update, the voting power of Mitsubishi UFJ Financial Group, Inc reduced to 9.19% from 11.01%.

Dividend: Recently, the company declared a dividend of AUD 0.2200 per ordinary share to be paid on 03 October 2019.

FY19 Results Highlights: During the year, total transaction value (TTV) increased to $6.46 billion, representing a percentage upliftment of 30%. Underlying EBITDA for the year stood at $150.1 million, up 20% on prior corresponding period. Statutory NPAT for the period was reported at $86.2 million, rising 12% on pcp.


FY19 Performance (Source: Company Reports)

Outlook & Guidance: Underlying EBITDA for FY20 is expected to be in the range of $165.0 million - $175.0 million, with the lower end of the guidance, depicting continuation of current trading environment as a result of Brexit, the US-China trade tensions and the demonstrations in Hong Kong through the end of CY19.

Stock Recommendation: Over a period of 1 year, the stock generated a negative return of 40.67%. In FY19, the company reported record operating cash flow conversion rate of 113% as a result of timing of payment cycles against the reporting period. The company client value proposition supported strong performance with organic growth of 16% over the previous year. Moreover, the company will continue to seek selective opportunities for M&A to bring strong value indoors.In FY19, the company had an EBITDA margin of 33.5%, higher than the industry median of 24.9%. Net margin for the year stood at 20.0% as compared to the industry median of 9.2%. Currently, the stock is priced close to its 52-week low level of $17.30 with PE multiple of 22.84x and an annual dividend yield of 2.2%.Based on the above factors, we give a “Hold” recommendation on the stock at the current market price of $18.550, up 2.035% on 23 September 2019.
 
 
 Comparative Price Chart (Source: Thomson Reuters)

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