Flight Centre Travel Group Limited

FLT Details

FY21 Key Results Highlights: Flight Centre Travel Group Limited (ASX: FLT) is an Australia-based travel retailing company including both corporate and leisure sectors. It covers other services like corporate travel sectors, plus in-destination travel experience businesses, tour operators, hotel management, destination management companies (DMCs) and wholesaling.

• Reported Loss in FY21: The company reported statutory loss of $433.45 million in FY21, owing to cash burn of $30mn & $40mn in second half on a monthly basis, and restrictions on flights during COVID-19 outbreak.
• Decent Liquidity Position: The company ended the period, with $1.36 billion in cash reserves. FLT holds total liquidity of $941mn as at 30 June 2021, which can run company till 2023.
• Revenues Highlight: Although, the company’s FY21 revenue declined ~79% year over year, however, for 2HFY21, it went up 48% year over year and recorded robust Q4 results, as countries entered and re-emerged from lockdown.
• The Decline in Costs: The company carried out cost reduction strategies in March 2020, which resulted in 59% decline in underlying costs.

Revenue Highlight (Source: Analysis by Kalkine Group) 

Key Risks: As FLT’s mainstream of revenue comes from frequency of flights flown, it is directly affected by the government policies regarding re-opening of Australian, Americas, EMEA and Asia borders (domestic & international) and vaccination rates.

Outlook: For FY22, the company expects to invest in marketing & cost reduction strategies like introducing core innovative technologies & new IC models contributing to customer acquisition and customer retention. An increase in Americas & EMEA corporate account is expected in FY22 with an objective to create long term value for the customers. Whereas, on the partnership front, new long-term deals with Singapore Airlines, Qatar & Etihad are in final stages of completion.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Analysis by Kalkine Group

*5% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock has provided a return of 9.3% and is trading higher than the average 52-week price level band of $11.18 and $20.16. On technical analysis front, the stock of the company has a support level of ~A$13.62 and a resistance level at ~A$20.27. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of mid-single-digit (in % terms). For the purpose of valuation, peers like Tabcorp Holdings Ltd (ASX: TAH), Crown Resorts Ltd (ASX: CWN) and Star Entertainment Group Ltd (ASX: SGR) have been considered. The company can trade at some premium, considering decent 2HFY21 revenue performance, increase in gross margin in FY21 Vs FY20 and modest long-term customer acquisition and partnership strategies. Considering the company’s supportive outlook for future market share, countries re-entering and re-emerging from lockdown post COVID-19 restrictions, current trading levels, and valuation, we give a “Hold” rating on the stock at the current market price of $16.650, down by ~1.421% as on 30 August 2021.

FLT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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