Flight Centre Travel Group Limited

 
Strong TTV Growth in 1HFY19: Flight Centre Travel Group Limited (ASX: FLT) is engaged with travel retailing in both the leisure and corporate travel sectors, plus in-destination travel experience businesses including tour operators, hotel management, destination management companies (DMCs) and wholesaling. The operations of the company spread over twenty-three countries along with a corporate travel management network that spans more than ninety countries. It has more than 19,000 people globally and has a total of 2800 businesses. Moreover, the company maintained a decent history of growth, being a top leisure travel company in Australia, NZ, and South Africa.
 

A Growth Company (Source: Company Reports)
 
Turning to the financials of the company, thecompany’s total transaction value increased by 10% to $11.16 billion in 1HFY19, surpassing the 1HFY18 milestone by over $1 billion. The underlying profit before tax of the company increased by 0.7% to $140.4 million, which is within the targeted range for the period. However, the net margin (underlying PBT as a percentage of TTV), decreased to 1.26% against 1.37% in the prior corresponding period, largely as a result of the lower Australian leisure profits during the first half of 2019. The revenue margin (revenue as a percentage of TTV) decreased as a result of the current business mix changes, specifically the growth in lower revenue margin businesses.
 
Guidance & Outlook: The company has amended its FY19 profit guidance. The company is continuing its half yearly trading patterns into the second half, with the sales tracking at record levels and the company again performing strongly in the corporate travel sector globally and in key markets, including the USA, the UK, and Asia. The company expects the businesses outside Australia to generate more than half of group profit and earnings globally.
 
While the overall results for FY19 are expected to be disappointing, the company was placed well to deliver further growth, on the back of its brand and geographic diversification along with a strong balance sheet and its ability to capitalize on new opportunities. The short-term results will be below the initial expectations; however, the company has a promising sign going forward.
 
In the past one year, the stock of the company has fallen 33.64% and is trading close to its 52-week lower level of $37.59 with reasonable PE multiple of 16.72x and annual dividend of 4.1%. Its EBITDA margin for H1FY19 stands at 12.4%, which is lower than the industry median of 26.3%. Its current ratio for H1FY19 stands at 1.52x, which is slightly higher than the industry median of 1.11x. Given the backdrop of mix scenario, we have a wait and watch view on the stock at the current market price of $40.880 per share (up 0.442% on June 24, 2019).  
 
 

JB Hi-Fi Limited

 
Earnings Grew by 5.4% in 1H19: JB Hi-Fi Limited (ASX: JBH) is an Australia’s leading retailer of home consumer products. It is engaged in the online and in-store sale of wide product categories, which include consumer electronics, mobile devices, games and consoles, music and audio systems, home theatres, car sound, instruments, cooking appliances and white goods, along with its technology and consulting services through its wholly-owned unit, JB HI-FI Solutions.
 
The company re-appointed Cameron Trainor as a Managing Director of the company. Under Cameron’s leadership, Group Merchandise has developed Group wide trade reporting, tracking, and benchmarking protocols across all aspects of merchandise. Cameron has also implemented several improvement programs including a revised Group Private Label strategy. Lynda Blakely has been appointed to the role of Group HR Director with responsibility for Human Resources across both the JB Hi-Fi and The Good Guys businesses. Simon Page has been appointed to the role of Group Technology Director, bringing together two strategically important and talented teams.
 

HY19 Financial Results (Source: Company Reports)
 
Turning to the financials of the company, total sales grew by 4.2% to $3.8 billion in 1HFY19. The company reported a net profit after tax up 5.5% to $160.1 million in 1HFY19 as compared to $151.7 million in 1HFY18. Further, the company expects net debt at 30 June 2019 to be in the range of $320 million to $350 million, a reduction of circa $50 million to $80 million on a year-on-year basis.
 
What To Expect from JBH: The company confirmed its FY19 guidance. It expects the total group sales to be circa $7.1 billion consists of JB HI-FI Australia at $4.73 billion, JB HI-FI New Zealand at $0.24 billion and The Good Guys at $2.15 billion. Total Group NPAT is expected to be in the range of $237 million to $245 million, an increase of 1.6% to 5.1% on the prior corresponding period.
 
Meanwhile, the share price has risen 8.35 per cent in the past three months as at June 21, 2019 and is trading above the average of 52 week high and low prices of around $24.47 with a PE multiple of 12.34x and an annual dividend yield of 5.28%. As per ASIC dated 18 June 2019, 15.58% has been reported as short positions as a percentage of total product in issue. Based on the foregoing and looking at current trading level, we have a wait and watch view on the stock at the current market price of $25.780 per share (down 0.655% on 24 June 2019).  

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