Helloworld Travel Limited

HLO Details

2021 AGM Highlights: Helloworld Travel Limited (ASX: HLO) is a travel management service provider in Australia and New Zealand. On 10 November 2021, HLO held its 2021 Annual General Meeting (AGM), wherein, the management highlighted that over the last two years, the company’s focus is on reducing its costs so that it can tackle the impact of COVID-19 pandemic. Some of the key highlights of 2021 AGM are as follows:

• FY21 Results Update: For FY21, the company reported EBITDA loss of around $24 million, which included over $9 million of redundancy and restructuring charges. Due to the closing of international borders in Australia and New Zealand, HLO witnessed a decline in total transaction values.
• Technology Developments: HLO has rolled out its retail mid-office system, ResWorld, to over 120 agents in Australia and New Zealand. In its wholesale business, the company has rolled out a new booking platform, Mango, in partnership with Tourplan.
• Operating Outlook Update: With the reopening of Australia’s international borders, HLO expects significant growth in the demand from its leisure and corporate customers for traveling services.

Revenue Trend (Source: Analysis by Kalkine Group)

Director Appointment: On 9 November 2021, HLO announced the appointment of Robert Dalton as an Independent Non-Executive Director to the Board of HLO.

September Quarter Update: For Q1FY22, HLO reported a total TTV of $266.5 million, up 50% on pcp. Further, the company reported revenue of $20.3 million, up 62.7% on Q1FY20, reflecting a revenue margin of 7.6%. EBITDA loss for the September quarter stood at $3.6 million compared with $6.3 million in pcp.

Key Risks:

• COVID-19 Uncertainties: The uncertainty regarding the impact of COVID-19 pandemic, which could cause closure of international borders and travel restrictions, still prevails.
• Stiff Competition: HLO operates in highly competitive travel industry, exposing it competition risk.

Outlook: Looking ahead, the company is focused on maintaining disciplined approach to cost management while maintaining service levels to its corporate, wholesale and retail agency customers. Due to the reopening of international borders and easing of restrictions, HLO expects to see positive trading conditions evolve through 2022 and beyond. 

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

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: Over the last three months, the stock has provided a return of 57.14%. The stock has a 52-week low and high of $1.5 and $3.36, respectively. The stock has a support level of $2.15 and resistance level of $2.66. The stock has been valued using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of high single digit (in percentage terms). The company can trade at a slight discount, considering the weak FY21 results, and uncertainty surrounding the COVID-19 pandemic, etc. For the valuation purpose, peers such as Corporate Travel Management Ltd (ASX: CTD), Flight Centre Travel Group Ltd (ASX: FLT), Blackmores Ltd (ASX: BKL), and other have been considered. Considering the company’s weak FY21 results, decent returns in the last three months, uncertainty surrounding the COVID-19 pandemic, and indicative downside in valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the current market price $2.50, as on 19 November 2021, 10:45 AM (GMT+10), Sydney, Eastern Australia).

HLO 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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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