Flight Centre Travel Group Ltd

Flight Centre Travel Group Ltd (ASX: FLT) is Australia’s largest retail travel company with operations in 23 different countries.

A look at FY18 performance:The company reported a total transaction value (TTV) of $21.8 billion in FY18 representing a growth of 8.5% or $1.7 billion as compared to FY17 with 49% of TTV generated offshore. The revenue for FY18 was reported at $2.95 billion with an increase of 6.5% as compared to FY17. The company reported an EBITDA of $441.5 million during FY18 with an increase by 7.13% over the previous year. The current EBITDA margin stood at 14.97%. The profit before tax (PBT) was up by 12% reaching to $363 million in FY18. It was 5% below the underlying PBT. The net profit after tax (NPAT) stood at $264.2 million during FY18, up by $33.4 million and the NPAT margin stood at 8.96%. FLT paid $1.67 in fully franked dividends per share. EPS also increased by 14% reaching to 260.5 cents. The intangibles increased by 30% on account of a few acquisitions made by FLT during FY18. During the year, the short-term borrowings went down by 38% and now are reported at $35 million. The net debt was reported at $517 million with an increase of 9%. The company was able to generate a cash inflow of $314 million during FY18. During the financial year, the company reported a capex of $87.4 million which was 16% below from the previous year’s capex. For FY19, capex is likely to be around $110 million. On the other hand, the cost margin improved by 50 bps during FY18.


Transformation Targets (Source: Company Reports)

FY19 till date performance and guidance: PBT is expected to range between $140-$150 million for 1H 2019 and $390-$420 million for FY19 with a single digit yield growth for both the periods. As per the management, the first quarter of FY19 witnessed total transaction value (TTV) slightly above the company’s long-term target of 7% annual growth in constant currency through to FY22. Overseas sales are expected to increase by around 50% in FY19. In September 2018, FLT acquired Umapped, to fuel digital transformation.

Fundamental analysis: The TTV for the company went up from $16,049 million in FY14 to $21,826 million in FY18 with a CAGR of 7.7%. The total revenue of the company has increased at a CAGR of 6.8% over the past five years. Over the five years, the income margin declined by 50 bps falling from 14% in FY14 to 13.5% in FY18. Although the EBITDA grew at a CAGR of 3.8% increasing from $378.4 million in FY14 to $441.5 million in FY18 but the EBITDA margin went down by almost 2% over the past 5 years with the current margin of 15%. Similarly, the PBT and PAT increased at a CAGR of 2.8% and 6% over the past five years but the margins have declined. The ROE also declined by 1.8% over the past 5 years. FLT has a market cap of $4.3 billion with a beta below 1x.

Technical Analysis:Over the past six months, the stock is in the downtrend and has fallen by 32.22% and is currently trading at $42.43. Today also, the stock was down. The scrip price has breached its one-year support level of $43.2 and is currently lying on the lower end of the Bollinger band. The Relative Strength Index (RSI) is also visible near to the oversold position.

Although, with the bottoming of the prices, the stock is showing a bullish sign for the future (being in the positive territory of RSI as well as the price touching the lower end of the Bollinger band), but because the stock has recently breached its one-year support level and there has been a drop in margins through fundamental analysis, the scrip exhibits a wait and watch scenario until a new support level is made and we see healthy growth drivers.
 

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