Stocks’ Details

Flight Centre Travel Group Limited

Key Takeaways from FY19 Results Presentation: Flight Centre Travel Group Limited (ASX: FLT) is into the travel retailing in leisure and corporate travel sectors. The market capitalisation of the company stood at ~A$4.43 Bn as on 22^nd August 2019. Recently, the company published its FY19 results wherein it highlighted record total transaction value amounting to $23.7 Bn in FY19, which has surpassed record FY18 result by almost $2 Bn. The record TTV throughout all geographic segments was primarily driven by corporate brands. The revenue margin of the company witnessed a decline of 55 basis points, resulted by ongoing business mix changes, and impact of revenue margin decline in FCB Australia. It added that the Americas business is now an earnings powerhouse with a rise of 5 times in underlying earnings since FY16.

 
Profit & Loss Statement (Source: Company Reports)

What to Expect:The company stated that the results for FY20 are again likely to be generated by the company’s corporate and international businesses, although the improvement is also expected in Australia. The Americas business of the company is now entrenched as a key earnings driver, with expectations of strong growth into the future. The longer term TTV growth target in place of more than 7%. The company has a continued focus on cost reduction and efficiency gains and further geographic expansion.

Stock Recommendation: The company’s vision for 2025 is to become a thriving global travel company with a distinctive, entrepreneurial culture, famous brands and winning models. The total cash balance of the company stood at $ 1,172 Mn in FY19 as compared to $ 1,273 Mn in FY18.On the stock performance front, it has increased by 2.34% in the time span of six months. However, on a YTD basis, it rose by 8.28%. Hence, considering the above-stated facts and current trading levels, we believe that this stock is a watch at the current market price of A$47.140 per share (up 7.527% on 22^nd August 2019, post the release of earnings for FY19).
 

Scentre Group

Distribution Payments for 1H FY19:Scentre Group (ASX: SCG) is into the property management and development. The market capitalisation of the company stood at ~A$20.47 Bn as on 22^nd August 2019.  Recently, the company via a release announced distribution for the six months ended 30 June 2019 amounting to 5.7 cents per unit, which will be paid by the company on 30^th August 2019. It was also mentioned that distribution does not include any amounts attributable to a fund payment from a clean building managed investment trust.

As per the half yearly results presentation (1H FY19), the company has an extraordinary platform with 41 Westfield Living Centres, which have been valued at over $54 Bn. From the time of the establishment of SCG, the annual customer visitation has grown to more than 535 Mn. The following table provides an idea of the company’s financial performance:


Financial Performance (Source: Company Reports)

Future Aspects: For FY19, the company is expecting fund from operations per security growth of around 3% excluding transactions, and approximately 0.7% including transactions. It anticipates distribution per security of 22.60 cents for FY19. The company is expecting comparable NOI growth in the range of 2.0% - 2.5% for FY19. It continues to enhance the most efficient platform for its retail partners in order to engage with their customers.

Stock Recommendation: The company has a strong financial position with FFO to Debt at 11.3% and interest cover at 3.5x. The liquidity position of the company stood at $4.0 Bn with gearing of 30.6%. The company further stated that Westfield Newmarket development is progressing well with staged openings to commence on 29 August 2019. Currently, the stock is trading slightly below the average of 52 weeks high and low level of $4.32 and $3.63, respectively with reasonable PE multiple of 8.93x and an annual dividend yield of 5.81%, indicating a decent opportunity for accumulation. Hence, considering the aforesaid facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$3.900 per share (up 1.299% on 22^nd August 2019).
 

Webjet Limited

A Quick Look at FY 2019 Results: Webjet Limited (ASX: WEB) is into the online travel booking services for flights, hotels, car hire, etc. The market capitalisation of the company stood at ~A$1.88 Bn as on 22^nd August 2019. Recently, the company has released its full-year results for FY19, wherein it stated that after the acquisitions of both JacTravel and Destinations of the World, WebBeds business of the company is the leading business throughout bookings, TTV and EBITDA. Additionally, Webjet Online Travel Agency continues to outperform with flight bookings growing around twice the underlying market. Despite a tough domestic market in FY19, both TTV and EBITDA margins improved, increasing to 10.9% and 40.4% respectively. The following picture provides an overview of the financial performance of the group:

  
Financial Performance (Source: Company Reports)

Future Guidance: As per the annual report 2019, the company continues to witness significant opportunities for profitable growth throughout all regions in WebBeds business. Also, it continues to look for attractive acquisition opportunities in order to supplement its existing businesses. On the back of increasing scale, the company is expecting to deliver a profitability target of “8/4/4” in the WebBeds business (8% revenue/TTV and 4% costs/TTV to deliver 4% EBITDA/TTV) by financial year 2022. The company would also continue to focus on higher TTV margins and lower acquisition costs in Online Republic.

Stock Recommendation: In FY19, the company declared a fully franked final dividend amounting to 13.5 cents per share, which is bringing the total dividend to 22 cents, reflecting a rise of 10% over FY18. The company’s underlyingcash conversion stood at 98%, which is in accordance with a target range of 95%-110%. This represents the continued improvements in working capital management.The statutory earnings per share on the company stood at 47.0 cents, reflecting a rise of 30% on a YoY basis. Hence, in light of above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$12.700 per share (down 8.303% on 22^nd August 2019, which seems to be an adverse reaction from the market and/or some bit of profit booking). 
 

IMF Bentham Limited

A Quick Look at FY19 Results:IMF Bentham Limited (ASX: IMF) is into the provisioning of litigation funding and support services to insolvency and legal practitioners with a market capitalisation of ~A$654.75 Mn as on 22^nd August 2019. Recently, the company, with the help of a release, announced its full-year results for FY19. It stated that the group has increased headcounts, number of investments, geographic mix, size and type of cases in the portfolio. The company has upsized its RoW funds 2 & 3 from $150 Mn to $180 Mn. The cash balance of the company stood at $226.5 Mn in FY19, reflecting a rise of 41% on a YoY basis. It further added that, with significant cash reserves, the company is growing the business, financing large investments and are a formidable ally in litigation. Over the past three and a half years, the company has focused on transitioning away from idiosyncratic risk to systemic risk of a portfolio, which has been reflected in the increased number of investments, throughout a broader range of case types, sizes and jurisdictions.  The following picture provides an idea of the investment portfolio of the company at June 30, 2019:


Investment Portfolio (Source: Company Reports)

Future Guidance: The growth opportunities of the company primarily revolve around financing the solvent corporates throughout all jurisdictions coupled with strong pipelines in all jurisdictions and increase in number of Investment Managers. The company is increasing world-wide awareness and appetite for dispute finance. It is planning the expansion of footprint into continental Europe by way of acquisition or greenfields development and is planning the expansion of operations in Asia and Canada.

Stock Recommendation: The current ratio of the company stood at 5.55x in 1H FY19, reflecting YoY growth 32.7%. This implies that the company has improved its position to address its short-term obligations. The asset to equity ratio of the company stood at 2.67x in 1H FY19 as compared to the industry median of 7.26x. On the stock’s performance front, it produced returns of 12.20% in the time span of three months. Currently, the stock is priced close to its 52-week high level of $3.500. Hence, considering the above-stated facts and current trading levels, we give a “Hold” rating on the stock at the current market price of A$3.120 per share (down 2.5% on 22^nd August 2019).


Comparative Price Chart (Source: Thomson Reuters) 

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