Corporate Travel Management Ltd.

CTD Details

Corporate Travel Management Ltd. (ASX: CTD)  is an Australian based company engaged in providing travel management solutions, manages the purchase and delivery of travel services for the corporate market worldwide. It operates in four segments: Travel Services Australia and New Zealand, Travel Services North America, Travel Services Asia, and Travel Services Europe. The company was founded in 1994 and is headquartered in Brisbane, Australia.

Financial Highlights for Q4 FY21: 30^th June 2021

• The Rise in Revenue: Revenue from ordinary activities stood at $74 million, up 42% QoQ, driven by the recovery across North America and the European Union region as the travel restrictions eased there on account of declining cases and vaccination rollout.
• Underlying EBITDA from continuing operations stood positive at $13.6 million in 4Q FY21 from the negative EBITDA of $5.5 million in 3Q FY21.
• Debt and Cash Balance- CTD has no debt on its book for the year ending and the cash balance stood at $99 million as of June 30, 2021.

Results Highlights for FY21:

• Drop in Revenue: Revenue dropped by 43% to $200.5 million in FY21 over pcp, led by COVID-19  lockdowns with cross border travel restrictions and the work from home arrangement, made the travel requirement minimal unless necessary.
• Net losses: The statutory net loss widened to $57.8 millon in FY21 on account of various one-offs such as acquisition and integration related costs.
• The company had unused committed facility of GBP 60 million. It operated in sufficient cash to manage its business during the pandemic.

Financial Performance (Source: Company Report)

Key Risks:

The key risks with the Corporate Travel Management Ltd., is of the rising COVID 19 severity in terms of the new Delta variant, gripping the Australian market, bringing it under the severe lockdown restrictions and cross border travel coming to stagnation and still far from pre-COVID levels. Also, the company faces major risks from the currency fluctuations too.

Outlook:

Corporate Travel Management Ltd. shared the positive outlook on the full revenue recovery because of transformational acquisitions executed. Further, the group expects to return to FY19 EBITDA margin because of the efficient cost optimization and synergy realisation, despite the Travel and Transportation combination margin dilution.

Valuation Methodology: EV/ EBITDA multiple-based Relative Valuation (Illustrative)

Stock Recommendation:

The stock of CTD gave a return of ~+17.63% in the last three months and a return of ~+20.69% in the last six months. The stock is trading above the average of the 52-week low price of $12.650 and the 52-week high price of $22.880. On the technical front, the immediate resistance appears at the $23.75 level while support is at the $20.50 level. The leading indicator RSI (14-period) is trading at ~55.068 levels and forming a negative divergence with the price action. The stock has been valued using an EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in percentage terms). The company might trade at a slight premium to its peers’ average, considering the diversified services and strong recovery posted in H2FY21. For the purpose of valuation, few peers like Jumbo Interactive Ltd. (ASX: JIN), Flight Central Travel Group Ltd. (ASX: FLT), Helloworld Travel Ltd. (ASX: HLO), have been considered. Considering the acquisitive strategies and rising losses, inherent investment risks, the current trading levels, and downside potential as indicated by the valuation, we advise investors to book profit. We give a "Sell" rating on the stock at the price of $22.02, as of 19 August 2021, 12:18 pm (GMT+10), Sydney, Eastern Australia.

CDT Daily Technical Chart, Data Source: REFINITIV 

Breville Group Ltd.

BRG Details

Breville Group Ltd. (ASX: BRG)  is an Australia-based company that provides small electrical appliances in the consumer products industry. The company operates through two segments: Global Product and Distribution. Global Product segment offers premium products designed and developed by its Breville brand.

FY21 Result Performance Highlights:

• The Rise in Revenue: Revenue for FY21 increased by 24.70% YoY to $1.18 billion, primarily driven by new products and revised product lines and the regional growth of 51.2% from EMEA and 36.1% from APAC.
• Increase in EBITDA: The astonishing growth of 39.6% in EBITDA to $163.3 million on YoY was on the back of improved gross margin with higher average selling price thereby offsetting input cost inflation.
• Dividends: The company announced full-year dividends of 26.5 cents per share, which is 35.4% down from the prior year.
• Debt and Cash Balance- BRG had a net cash of $129.9 million in FY21 with adqequate working capital debt facilities in-place.

Operational Updates for FY21:

• Launch of New Products: A wide range of new products were launched such as Fast Slow Pro, the Banbino, Creatisa Pro, Hydo Pro and Hydro Plo Plus. The group is anticipating incremental sales from such new launches without disrupting the sales of the existing line of products.
• Net Geographies: BRG has entered four new markets during FY21: France in April 2020, Portugal in March 2021, Italy in April 2021 and Mexico in May 2021, with the hope of garnering a solid market share with its great product lines.
• Acquisitions: The company acquired Baratza, headquartered in Seattle, WA, USA and completed the transaction in September 2020.

Financial Performance (Source: Company Report)

Key Risks:

Breville Group Ltd. is sensitive to household disposable income. The COVID-19 impacted the employment and small businesses, which increases the unemployment rates across the prominent countries. Further, the major risk is the volatile currency rates, for example, Americas reported currency revenue growth stood at 16.7%, while it increases by 27.6% on a constant currency basis. Any unfavourable movements can hamper the profitability.

Outlook: The company enters into the new markets, with improved and new product lines and the acquisition is expected to bring in the synergies to provide its shareholders and stakeholders with far better returns. 

Valuation Methodology: EV/ Sales multiple-Based Relative Valuation (Illustrative)

Stock Recommendation:

The stock of BRG gave a return of ~+25.128% in the last three months and a return of ~+4.426% in the last six months. The stock is trading above the average of the 52-week high price of $33.61 and the 52-week high low of $23.27. On the technical front, immediate resistance for the stock appears at the $24.10 level while support is at the $29.25 level. The leading indicator RSI (14-period) is trading at ~53.449 levels and forming a negative divergence with the price action. 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 low single-digit (in percentage terms). The stock can trade at a slight premium as compared to its peer’s median EV/ Sales (NTM trading multiple) considering the severity of the COVID-19 lockdown and the declining household income. For the purpose of valuation, few peers like Atoms Ltd. (ASX: AMS), Fleetwood Ltd. (ASX: FWD), Audeara Ltd (ASX: AUA), have been considered. Considering the inherent investment risks, the current trading levels, positive returns, and downside potential as indicated by the valuation, we advise investors to book profit. We give a "Sell" rating on the stock at the price of $32.270, as of 19 August 2021, 12:19 pm, (GMT+10), Sydney, Eastern Australia.  

BRG 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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