Event Hospitality and Entertainment Limited

Recent acquisition to increase footprint in Sydney:Recently, EVTentered into a contract with Moss Nominees Pty Limited for the purchase of the properties located at 458-472 George Street in Sydney for the consideration of $116 million. The buildings were leased to several retail and commercial tenants with net rental revenues of approximately $2.45 million per annum. This strategic acquisition is a key milestone as it ensures control of the south-eastern corner of George, Market Streets in Sydney to further crystallize the value through an annualized incremental EBITDA boost of around 1.5 cents per share; and will increase EVT’s footprint in Sydney’s central business district to approximately 4,700 m and an 88-meter frontage on a prime section of George Street.On the other hand, EVT’s H1FY17 revenue dropped by 0.8% while net profit was down 22.6% year on year (yoy) at $656.1 million and $59.4 million, respectively. This was at the back of soft film slate. For instance, Force Awakens which grossed $62.7 million at the Australian Box Office in the 15-day period from release until 31 December 2015, while compared to Rogue One, which grossed $36.4 million in the 17-day period from release until 31 December 2016. The result was also impacted by recently opened cinema sites that are currently in the establishment phase. The stock has moved up by 17% in the last six month as on May 02, 2017 and currently trading at close to its 52-week high. We give an “Expensive” recommendation on the stock at the current price of $ 13.62

Mantra Group Limited

Well placed to leverage on increasing growth opportunities:MTR has lately clarified that the group is not in discussion with any potential buys concerning the takeover speculation hyped by the media. For H1FY17, Mantra group reported a strong 15.9%, 15.1% yoy growth in revenue and underlying Net Profit After Tax (NPAT) at $356.2 million, $31.8 million respectively. Robust growth in revenue and earnings was driven by four new properties acquired during H1FY17 coupled with organic growth in domestic and international travel, an increase in the total number of rooms available across both the Resorts and CBD operating segments, improved occupancy levels, higher average room rates in Resorts and improved efficiencies in key areas. Importantly, Mantra-branded Ala Moana Hotel in Honolulu Hawaii has recorded solid results by contributing $27.2 million in revenue in H1FY17. Further, development pipeline remains strong for the group with Mantra Club Croc, Airlie Beach and TRIBE West Perth due to open in H2FY2017. The group’s new-build Mantra hotel at Sydney Airport is scheduled to join the chain in July 2017, while Mantra Macarthur Hotel, Canberra and Brisbane’s luxurious is due to open in August 2017. The company reaffirmed the earlier guidance of $101.0- $107.0 million in EBITDA and $48.5-$52.5 million in NPAT.
 

Market Scenario (Source: Company Reports)
 
Despite the robust business fundamentals and strong financial position, the stock declined by 21% in the last twelve months but has moved up 4% in last three months, as at May 02, 2017.  Catalysts such as improving sentiments, better results and tourism boom, are expected to provide performance support in the future. The group expects the market to witness 3-4% growth in International Tourists Arrival in 2017. We give a “Buy” recommendation on the stock at the current price of $ 3.01

Qantas Airways Limited

Transformation benefits:Despite challenging conditions due to changing capacity on international routes and fares issues, Qantas could report for an underlying Profit Before Tax of $852 million in H1FY17, still $69 million lower than H1FY16. In H2FY17, company expects overall capacity to increase by 1-2% while domestic capacity is expected to decrease by ~2%. However, unit revenue is expected to increase in H2FY17 despite continued softness in resources. Moreover, group International capacity is expected to increase by ~3% driven by targeting new destinations in growing Asia markets by using existing fleet to target. Qantas has unlocked another $212 million of transformation benefits in the H1FY17 by reducing costs and on track to achieve $2.1 billion by June-2017. In H2FY17, Qantas and Jetstar expect to continue impressive performance and Qantas Loyalty is expected to return to double digit growth as it provides sustainable earnings, supported by improving consumer confidence. The company is focusing on maintaining margin lead over the competition and continues to manage volatility with fuel hedging and ongoing cost control. Moreover, beyond H2FY17, it will be investing to strengthen the existing business with innovative technology to be one of the world’s best airlines. The stock has moved up by 45.8% over past six months, and currently trading at 52 week high. The group has made some changes to management including the appointment of Richard Goyder AO as non-executive director; and also appointed Debra Joan Smith as new company secretary. Given the not-so-impressive prospects and current trading levels, we give an “Expensive” recommendation on the stock at the current price of $ 4.42

Flight Centre Travel Group Limited

On track to achieve PBT Guidance:Flight Centre stock has moved up over 11.9% in last one month (as at May 03, 2017) and is still continuing with an up-rise trend (5.8% up on May 04, 2017). Total transaction value (TTV) in FY17 is expected to top $20 billion with a year of record sales. The group also expects to report FY17 PBT of $300-330 million driven by accelerated TTV and cost-control benefits.
 

Growth Opportunities (Source: Company Reports)
 
During H1FY17, FLT reported 1% and 22% yoy decline in revenue and PBT, largely impacted by airfare deflation coupled with currency fluctuations in the international market. However, ongoing business transformation through the investment in new tools and systems, including digital enhancements have helped rapid online sales growth. Importantly, volume growth meaningfully outpaced the market growth and H1FY17 TTV topped $5 billion for the first time. Reduced earnings from the emerging Asia, Middle East and UK-based tour operating businesses together recorded a $12.5 million decline H1FY17 profits. The new initiatives have been outlined to enhance omni-channel offerings. FLT now has company owned businesses in 20 countries, compared to just 10 countries three years ago including recent acquisition in Europe. Although challenges such as airfare deflation, FX fluctuations, cost growth and so forth prevail, FLT’s initiatives to sustain the long-term growth and leveraging on rising opportunities are expected to buoy the performance. We give a “buy” recommendation on the stock at the current price of $ 34.50

Sydney Airport Holdings

Rejected offer under NOI for Western Sydney Airport: Sydney Airport has recently turned down the offer in the Notice of Intention (NOI) from the Commonwealth Government to develop and operate the Western Sydney Airport (WSA) as the terms provided do not look to be in the best interest of the investors. SYD however, has undertaken extensive work to determine the likely demand and growth potential, construction costs, risk profile and financial returns of WSA. On the other hand, SYD had announced that International traffic looks to be strong in FY17, and has risen 5.7% for the first quarter of 2017. However, domestic travel was impacted by service interruptions owing to Cyclone Debbie. The group has also affirmed 2017 Distribution guidance of 33.5 cents. Through 2016, SYD’s investment in capacity and the passenger experience witnessed a rise owing to operating expenses.
 

Sydney Airport’s diverse market capture (Source: Company Reports)
 
Company expects further increase in overall operating expenses as it continues to deliver an improved airport experience for customers and passengers. Given the ongoing weakness in domestic traffic and rise in expenses, we maintain our “Expensive” recommendation at the current price of $ 7.13

Skydive The Beach Group Limited

Riding on acquisitions: Last month, SKB executed an agreement to purchase Reef Magic Cruises Pty Ltd (RMC) as part of its strategy to become the largest adventure tourism company in the world. As part of the deal, SKB will acquire 100% of the shares in RMC for a consideration of $15 million (funded by a bank finance facility through National Australia Bank Limited), which represents 4.8x RMC’s FY16 normalized EBITDA. The transaction was expected to be completed by early May 2017 and will improve SKB’s EBITDA by $3.1 million annually. Additionally, with the acquisition of RMC, SKB reiterated its earlier guidance for FY17 with revenue of $93.2 million ($91.7 million prior to RMC acquisition) and EBITDA of $22.1 million ($21.8 million prior to RMC acquisition). For H1FY17, SKB reported a strong revenue growth of 59.1% yoy and EBITDA growth of 82.2% yoy, primarily driven by acquisitions and improvement on operational efficiencies. SKB’s stock has moved up by 53.2% over the last one year as on May 03, 2017 driven by durable business impetus and recent expansions to take advantage of opportunities in growing tourism business. Currently, the stock is trading close to its 52-week high, we give a “Hold” recommendation on the stock at the current price of $ 0.63

Webjet Limited

Outperforming the market in B2C: For H1FY17, Webjet revenue grew by 68.8% to $124.8 million, while EBITDA grew by 173.4% to $49.7 million, driven by increased bookings in both digital retail (B2C) and digital wholesale (WebBeds B2B) divisions. During H1FY17, the B2C division continued to benefit from the shifting of bookings online as it reported 33 consecutive months of record TTV and outperforming the market average by 5x. Notably, the investments made in FY16 within the WebBeds division to accelerate growth opportunities is delivering as strong EBITDA growth is coming through it.  Further, the company has completed the sale of Zuji for $26.8 million, which is allowing it focus on higher growth B2B opportunities in the Asian market and increased EBITDA guidance for FY17 to $80 million, of which $61.1 million is expected to come from continuing operations.WEB’s stock has moved up by 87.4% over the last one year as on May 03, 2017 in line with the peers due to overall increasing growth in tourism business and WEB’s outperformance in bookings. The stock is trading at high levels. We give an “Expensive” recommendation on the stock at the current price of $ 11.70

Corporate Travel Management Limited

Upgraded FY17 earnings guidance: Corporate Travel Management’s stock rallied 8.5% on May 04, 2017 at the back of the recent update and upward revision of FY17 guidance. Importantly, CTD revised FY17 EBITDA guidance to be minimum of $97m against the previous guidance of $92-$97m, and expects strong momentum to continue in FY18. There has been a synchronized global growth in the group’s key markets. While there has been a short-term activity pause in the US, UK/Europe client activity has increased and ANZ/Asia activity remains flat. For H1FY17, CTD reported a robust revenue growth of 26% yoy at $150.5 million and EBITDA growth of 45% yoy at $40.4 million led by strong organic growth in its domestic and international markets.

 
Global Footprint and Performance Overview (Source: Company Reports)
 
CTD’s stock has moved up by 40.3% over the last one year as on May 03, 2017 in line with the industry due to overall increasing growth in tourism business. We give an “Hold” recommendation on the stock at the current price of $ 22.00

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.