Flight Centre Travel Group Ltd

FLT Details

FY20 Financial Highlights: Flight Centre Travel Group (ASX: FLT) is a large retail travel agency based in Australia. The company is primarily involved in travel retailing in both the leisure and corporate travel sectors. As on 12 October 2020, the market capitalisation of the company stood at ~$2.84 billion. For the year ended 30 June 2020 or FY20, the company posted a statutory loss before tax of $849 million, as compared to statutory profit before tax of $343 million in FY19, mainly due to the impact of COVID-19 pandemic on the operating environment on all travel markets. In the same period, the company saw a fall of 35.4% in Total Transaction Value (TTV) to $15.3 billion. At the end of June, the company had a positive net debt of ~$1.3 billion with gearing ratio of 33.2%. FLT has cancelled the interim dividend payment of 0.40 cents per share and has not declared any final dividend, in order to preserve cash and protect long-term shareholder value.

FY20 Results (Source: Company Reports)

Outlook: Looking ahead, the company is focused on extending its cash reserves and reducing its cost base. The company expects an inevitable rebound once COVID-19 restriction are lifted and consumer confidence recovers.

Valuation Methodology: P/B Multiple Based Relative Valuation (Illustrative)

P/B Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of FLT gave a return of 26.26% in the past six months and a return of 36.88% in the last three months. The stock is trading close to its 52-weeks’ low level. On a technical front, the stock of FLT has a support level of ~$9.65 and a resistance level of ~$17.97. We have valued the stock using the P/BV multiple based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Corporate Travel Management Ltd (ASX: CTD), Webjet Ltd (ASX: WEB), and Sealink Travel Group Ltd (ASX: SLK). Considering the current trading levels, positive long-term outlook, and valuation, we recommend a ‘Buy’ rating on the stock at the closing price of $14.25, down by -0.35% on 12 October 2020.

FLT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Bapcor Limited

BAP Details

Q1 FY21 Quarter Update: Bapcor Limited (ASX: BAP) is involved in providing automotive parts, accessories, equipment & servicing of motor vehicles. For the September 2020 quarter, the company reported YoY revenue growth of 27%, despite the onset of government-imposed restrictions in Victoria and Auckland due to COVID-19 pandemic, demonstrating the strength of its resilient and financially solid business. In the retail segment, the company witnessed revenue growth of 47% and in specialist wholesale segment, it witnessed revenue growth of 45%. 

FY20 Financial Highlights: On 19 August 2020, the company has announced its FY20 annual financial results, wherein the company posted revenues of $1.46 billion, up 12.8% on y-o-y basis. The increase was due to increased record revenues from Burson trade, specialist wholesale and retail segments. Earnings per share decreased by 9.2% to $30.36 cents in FY20 while net profit after tax came at $89.1 million, representing a fall of 5.5% on Y-o-y basis. In May 2020, the company raised $236 million through oversubscribed equity placement to strengthen the financial position and to navigate the potential impacts of the pandemic. Over the past five years, the company’s revenue has increased at a CAGR of 21%, as demonstrated in below graph.

Revenue and NPAT Trend (Source: Company Reports)

Outlook:  Looking ahead, the company is focussed on investing in its different, in order to increase its footprint and improve cost efficiencies. Due to COVID-19 uncertainties, the company has not provided any earnings forecast for FY21, however, it expects to deliver a decent first half.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters) 

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company went up by 42.72% in the past three months and is currently trading close to its 52-week high level of $7.65. The company has a market capitalisation of ~$2.58 billion, with a P/E multiple of 28.1x and an annual dividend yield of 2.29%. On a technical analysis front, the stock has a support level of ~$6.675 and a resistance level of ~$8.05. We have valued the stock using EV/sales multiple based illustrative relative valuation method and arrived at a target price of lower double-digit upside (in percentage terms). For the purpose, we have taken peers like ARB Corp Ltd (ASX: ARB), Autosports Group Ltd (ASX: ASG), and Eagers Automotive Ltd (ASX: APE). Considering the factors mentioned above, robust FY20 results, decent outlook and valuation, we give a “Hold” recommendation on the stock at the current market price of $7.85, up 3.153% on 12 October 2020.

BAP Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Helloworld Travel Ltd

HLO Details

Reinstatement to Official Quotation: Helloworld Travel Limited (ASX: HLO) is an Australia based company engaged in the operation of retail distribution networks of travel products and services globally. As on 12 October 2020, the market capitalisation of the company stood at ~$314.7 million.

On 2 October 2020, the company announced that its shares are getting reinstated to official quotation as ASX has allowed it to lodge its 30 June 2020 audited accounts until no later than 15 October 2020. The company also noted that it has a decent liquidity and a significantly lower cost base across all key business operations. As per the announcement, HLO is having $178 million of Cash balance including circa $100 million of unrestricted cash and an additional headroom on existing facilitates in the amount of $9 million as of 30 September 2020. 

FY20 Financial Highlights:  During FY20, the group reported Total Transaction Value (TTV) of $5 billion, down 23.1% on y-o-y basis, mainly due to Covid-19 led headwinds on all travel markets. Further, the company reported underlying EBITDA of $44 million and underlying profit before tax of $17.1 million, down by 40.1% & 66.3%, respectively. During the year, the company undertook several capital management initiatives to preserve cash and maximise financial flexibility. During FY20, operating free cash flow was negative $41.4 million.

FY20 Results (Source: Company Reports)

Outlook: The company is focusing on several cost savings strategies like workforce reduction and preservation of cash. With the improvement in the customer demand (achieved TTV of 35% in the pcp as of July), the company expecting to return into the growth phase from October onwards, which is a key positive.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of HLO gave a return of 47.88% in the past six months. On the technical analysis front, the stock of HLO has a support level of ~$1.715 and a resistance level of ~$2.473. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). For the said purposes, we have considered peers like Corporate Travel Ltd (ASX: CTD), Webjet Ltd (ASX: WEB), Sealink Travel Group Ltd (ASX: SLK), etc., which comes under Leisure and Recreation sector. Considering the decent returns in the past six months, resilient performance in the softer market conditions, long-term outlook, and current trading levels, we recommend a ‘Speculative Buy’ rating on the stock at a current market price of $2.03 on 12 October 2020. 

HLO Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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