The Australian Bureau of Statistics has indicated that the tourism data for the recent months reflects an increase in activity at travel front. During the month of March for instance, there has been a rise of 1.7% in the number of residents who returned to Australia after short-term trips against the prior corresponding period. Even there is an increase in number of tourists from different parts of the globe travelling to Australia. Therefore, few ASX listed travel and tourism stocks are expected to leverage from the statistics.
 

Corporate Travel Management Ltd

CTD Details

Acquisition of SCT Travel Group Pty Ltd & ANZ leadership changes:Corporate Travel Management Ltd.’s (ASX: CTD) stock has risen 19.98% in three months as on May 16, 2018. The company is acquiring SCT Travel Group Pty Ltd for the base consideration of AUD$5m, which represents approximately 5x FY19 EBIT, through a combination of cash and stock, with an additional earn-out component based upon long term growth. The acquisition includes PTC Corporate and Events business in QLD and NSW only. Further, this acquisition will be effective from 1^st July 2018 and there will be no contribution to FY18 results. Additionally, the acquisition of SCT will enhance the support and success of a key initiative of the ANZ CTM FY19 business plan to expand the SME corporate and events segment. In addition, the acquisition will bring Greg McCarthy, who is successful in the Australian corporate travel industry over three decades. Greg will be appointed CEO of ANZ segment, based in CTD’s Sydney office and will be reporting into Laura Ruffles. On the other hand, CTD has reaffirmed FY 18 outlook and expects FY18 underlying EBITDA to be approximately $125m, which is a growth of 27%. This implies second half organic EBITDA growth of over 20% and good momentum into FY19. Therefore, based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $ 25.040.
 

CTD Daily Chart (Source: Thomson Reuters)
 

Sealink Travel Group Ltd

SLK Details

Acquired Kingfisher Bay Resort Group:Sealink Travel Group Ltd (ASX: SLK), which has exposure to operations in iconic Australian destinations, has acquired the assets and operations of the Fraser Island Kingfisher Bay Resort Group (KBRG) on Fraser Island, Queensland, for a consideration of $43 million from Cosmos Australia Pty Ltd, and has completed all customary conditions precedent to it. This acquisition includes four distinct, profitable and well-established tourism and transport operations, Kingfisher Bay Resort, Eurong Beach Resort, Fraser Explorer Tours and Fraser Island Ferries. Further, it accounts for 90 per cent of accommodation rooms on Fraser Island. Moreover, the acquisition will boost Queensland tourism, as SLK will open a new business hub in Brisbane to manage and grow its successful Queensland operations, with the strong backing of the Queensland Government. Queensland is a major source of revenue for SLK. The acquisition is expected to be materially earnings per share accretive in the first full financial year. On the other hand, the group increased its interim dividend by 8.3% and with a conservative balance sheet gearing, the group aims to fund future growth opportunities. Meanwhile, SLK stock has fallen 5.47% in three months as on May 16, 2018 and we give a “Speculative Buy” recommendation on the stock at the current price of $ 3.850.
 

SLK Daily Chart (Source: Thomson Reuters)
 

Qantas Airways Limited

QAN Details

Tracking well on performance:Qantas Airways Limited’s (ASX: QAN) stock has risen 21.46% in three months as on May 16, 2018 as in the third quarter, the company has delivered 7.5% growth in the total revenue to $4.25 billion compared with the same period last year, and Group Unit Revenue (RASK) rose by 6.0 per cent. Group Domestic Unit Revenue grew by 8.0 per cent compared to the prior corresponding period due to the strong demand across key markets, including continued recovery of the resources sector and gains within the small-to-medium enterprise segment. Group International Unit Revenue also grew by 5.2 per cent due to an underlying demand growth and higher load factors, as well as the benefits of ongoing network adjustments to better match demand. Moreover, QAN has affirmed its existing outlook for capacity, fuel costs, capital expenditure and transformation benefits in the second half of FY18. For a full year 2018, QAN expects the underlying Profit before tax of between $1.55 billion and $1.60 billion. Further, at the end of April 2018, QAN has hedged approximately 70 per cent of its expected fuel costs for FY19 and the ongoing transformation as well as capacity and revenue management will help mitigate the impact of higher fuel costs.
 

Underlying Profit Before Tax (Source: Company Reports)
 
Additionally, QAN has ordered six additional Dreamliners for Qantas International and accelerated retirement of remaining 747s by end-2020. Currently, on-market share buy-back is approximately 50% complete. On the other hand, as per the Qantas Sale Act 1992 (Cth) and the Qantas Constitution, foreign persons are permitted to hold relevant interests of no more than 49% of the issued share capital of Qantas. ASX Listing Rule 3.19 requires QAN to notify the ASX when foreign persons hold relevant interests in Qantas equal to or exceeding 44%, and to update the ASX when that level of foreign ownership changes by more than 1% or again falls below 44%. Meanwhile, QAN stock is trading at a reasonable P/E multiple, and we give a “Buy” recommendation on the stock at the current price of $ 6.340.
 

QAN Daily Chart (Source: Thomson Reuters)
 

Flight Centre Travel Group Ltd

FLT Details

Drop in second half profit growth: Flight Centre Travel Group Ltd (ASX: FLT) stock has risen 27.23% in three months as on May 16, 2018 after the company in the first half delivered 8.7% rise in TTV to $10.16 billion (9.3% in constant currency). The revenue has increased by 5.4% to $1.37 billion, which led to a lower overall income margin. The margin fell due to the given changes in FLT's business mix. The Net profit after tax (NPAT) grew by 37.2% to $102.2 million due to USA tax rate changes and FLT's strong performance in the UK, which also operates with a lower corporate tax rate.
 

1H 18 Financial Performance (Source: Company Reports)
 
However, during 2H, profit growth is expected but the accelerated growth rate achieved during the 1H is unlikely to be maintained. This is due to the fact that FY17 2H was a comparatively stronger trading period. The Underlying PBT during the FY17 2H had increased 4.7%, after being 22.5% down in challenging trading conditions during the six months to December 31, 2016. On the other hand, with regards to ACCC's long-running competition law test case against the FLT, the Full Federal Court has imposed total penalties of $12.5 million on the group. Meanwhile, FLT stock is trading at a high P/E. Given the trading scenario and most of the catalysts factored into the stock while some headwinds prevail, we put a “Sell” recommendation on the stock at the current price of $ 62.980.
 

FLT Daily Chart (Source: Thomson Reuters)

 
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