Flight Centre Travel Group Limited
FLT Details
Flight Centre Travel Group Limited (ASX: FLT) is an Australia-based travel retailer that includes both corporate and leisure sectors. It covers 23 countries, including New Zealand, the Americas, Europe, the United Kingdom, South Africa, the United Arab Emirates and Asia.
Change in Equity Interest: FLC increased its equity interest from 22.5% to 70% in the Dubai based software as a service (SaaS) business – TP Connects (TPC), which has been on the foreground to disrupt the traditional distribution models. while on the other hand, UBS Group AG reduced its substantial shareholding from 6.66% to 5.47%.
1HFY22 Highlights:
- With the demands quickly rebounding, FLT has achieved a milestone $10m daily TTV for Flight Centre brand in Australia as on 22nd February 2022.
- The company closed its accounts with the cash balance of ~$1,210 million as on 30th December 2022, versus ~$1,290 on pcp.
Key Highlights (Source: Analysis by Kalkine Group)
Key Risks: As FLT’s mainstream of revenue comes from frequency of flights flown, it is might directly affected by the government policies regarding re-opening of Australian, Americas, EMEA and Asia borders (domestic & international) and vaccination rates.
Outlook: With the expectation of ~60-75% market recovery, $1b+ liquidity position, and structurally lower cost base maintained, the company is expecting its SME-focussed Corporate Traveller brand continue to grow at ~ 60% and a 50% TTV growth in FCM globally.
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 positive return of ~6.52% and corrected ~6.79% in last one month. Currently, it is trading lower than the average 52-week price level band of $13.67 and $25.28. 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-double-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 1HFY22 revenue performance, higher gross margin 1HFY22 and investments with TCP. 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 “Buy” rating on the stock at the current market price of $18.770, 01:00 PM (GMT+10), Sydney, Eastern Australia, as on 14 March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
FLT Daily Technical Chart, Data Source: REFINITIV
Redbubble Limited
RBL Details
Change in Substantial Shareholding: Redbubble Limited (ASX: RBL) works through online marketplace allowing independent creative designers to sell products like apparel, mobile cases, homes decor items, stationery, bags etc. Kayne Anderson Rudnick Investment Management, LLC, Virtus Investment Advisers, Inc, Macquarie Group Limited, Mitsubishi UFJ Financial Group, Inc. and First Sentier Investors Holdings Pty Limited ceased to be substantial shareholders in RBL.
1HFY22 Results Updates:
- Revenue: RBL has reported its Gross Transactional Value (GTV) as ~ $381 million, a decrease of ~14% in 1HFY22. While on the one hand, it reported ~$288 million as its total marketplace revenue, its underlying marketplace revenue was reported as ~$283 million.
- Profitability: RBL reported a decline of ~25% Y-o-Y and ~36% Y-o-Y, in its gross profit and gross profit after the paid acquisition (GPAPA), respectively.
- Balance Sheet: the accounts were closed with the cash and cash equivalents as of 31st December 2021 at ~$143.39 million, with a ~10% Y-o-Y of growth from 1HFY21.
Key Highlights (Source: Analysis by Kalkine Group)
Key Risks:
- Fluctuations in Demands and Sentiments: Due to the changes in customers’ preferences and sentiments, RBL is susceptible to the dynamic environment and its everchanging demands.
- COVID-19 and Omicron Variant Risks: Due to COVID-19 and the new variant, the company can be impacted by the lockdown regulations, affecting its sales.
- Technology Risk: The business’s efficiency also depends on the ease of its interface and technology provider to the customers and work with regular upgradation.
Outlook FY22: With the investments aligned in 2HFY22, the company expects a slight fall in its marketplace revenue and EBITDA margin in FY22. Looking forward to the medium-term aspirations, the company expects to reach ~$1.50 billion GTV with ~$250 million artists’ revenue and a total ~$1.25 billion per annum in marketplace revenue, hence growing the product portfolio.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% 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: As per ASX, the stock of RBL is trading at par to its 52-weeks’ low level of $1.520. The stock gave a negative return of ~61.83% in the past six months and a negative return of ~54.63% in the past nine months. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at some premium to its peers, considering the active customers and merchants it has on board, lower debt-to-equity ratio, and positive long-term outlook. For the purpose of valuation, few peers like Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY), Kogan.com Ltd (ASX: KGN) have been considered. Considering the expected upside in valuation, current trading levels, diversification through products and globalisation, targeting the medium-term aspirations, maintenance of artists and customers’ retention, optimistic long-term outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing market price of $1.520, down by ~3.185% as on 14th March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
RBL Daily Technical Chart, Data Source: REFINITIV
Good Drinks Australia Limited
GDA Details
1HFY22 Results: Good Drinks Australia Limited (ASX: GDA) has its business in brewing, packaging, and marketing for beer, cider, and other beverages.
- The sales grew by ~26% Y-o-Y, leading to ~$32.87 million revenue in 1HFY22 as compared to ~$28.43 million in 1HFY21.
- The NPAT decreased by ~30% Y-o-Y basis to to ~$2.52 million in 1HFY22 from ~$3.58 million in 1HFY21.
- GDA closed its accounts with a cash balance of ~$9.2 million as of 31 December 2021 versus ~$5.5 million as of 30th September 2021.
Key Metrics; (Analysis by Kalkine Group)
Key Risks: GDA faces the risk of increasing inflation, supplier concentration, COVID-19 supply chain interruptions, which impact the company’s operating costs.
Outlook: Due to international freight, COGS will increase in 2H FY22, but at the same time, GDA expects to maintain COGS target of $1/Litre. The company targets 20mL of own brands by FY25 and a growth of 20-25% in its own brand per annum. It aims a target of 65-70% gross profit and a consistent EBITDA growth. For FY22, the company has planned a marketing investment of ~$6.0m and working towards the target of 1 million "Brand-In-Hand" serves in FY22
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% 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: The stock of GDA gave a negative return of ~22.22% in the past three months and a negative return of ~22.34% in the past six months. The stock is currently trading close to its 52-weeks’ low level of $0.700. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers’ average EV/Sales multiple, considering the positive gross and net margin maintained and increasing quick ratio. For this purpose of valuation, a few peers like Treasury Wine Estates Ltd (ASX: TWE), Lark Distilling Co Ltd (ASX: LRK), Australian Vintage Ltd (ASX: AVG) have been considered. Considering the current trading levels, growth in sales volume, strategy to grow production volume, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.725, 10:30 AM (GMT+10), Sydney, Eastern Australia, as of 14 March 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
GDA Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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