Stocks’ Details
 

Flight Centre Travel Group Limited

Potential to grow despite adverse Federal Court Judgement: Flight Centre Travel Group Limited’s (ASX: FLT) stock was down by 2.6 per cent on April 13, 2018 while the group paid dividends to its shareholders. FLT has otherwise recorded significant growth in the stock price i.e., 83.77 per cent over the previous twelve months. Thus, the recent fall was partly owing to profit booking post the dividend payment; and owing to concerns about the Federal court judgement wherein the Court imposed a penalty of $12.5 Mn on the group in relation to the competition law test case, which was initiated by the Australian Competition and Consumer Commission (ACCC) in 2012. Following a long-running legal battle with the ACCC, the group was fined over five breaches of the Trade Practices Act between 2005 and 2009. Though the group believed that it acted lawfully, and it did not contravene the Trade Practices Act but the group respects the court’s decision and will continue to adhere to the policies and practices. This penalty will not affect FLT’s market guidance for FY18 on underlying profit before tax of between $360 Mn and $385 Mn, and penalty will be included in the Group’s statutory results for the year.

FLT is a cash rich company with cash and cash equivalent of $1,281.6 Mn, net debt to equity of less than 1x and net operating cash flow of $295.3 Mn and free cash flow of $191.2 Mn. The company has been paying regular dividends which reflects the sound financial health of the company. Bennelong Australia Equity Partner Ltd became a substantial holder of FLT in March 2018 by holding 8,250,920 securities with 8.1639 per cent of the voting power. Meanwhile, the share price was up by 26.80 per cent in the past six months and FLT has the potential to grow further given the travel and tourism sector landscape and financial performance that depicted profit growth, bolt-on acquisitions, and so forth. We recommend to “Hold’ the stock at the current market priceof $ 55.500.
 

Total Transaction Value Growth Trend (Source: Company Reports)
 

Nine Entertainment Co. Holdings Limited

Loss of cricket broadcasting rights:Nine Entertainment Co. Holdings Limited’s (ASX: NEC) stock was initially down but traded flat on April 13, 2018. The stock has slipped by 0.88 per cent in the past one month. The latest price movement has been at the back of the Company losing its cricket broadcasting rights. The company has confirmed that they have not been granted rights to Australian international cricket matches from the 2018/19 summer. However, this is said to have no impact on NEC’s FY18 result. Moreover, the company and Southern Cross Austereo announced that SCA will represent local television sales for Nine in the Northern New South Wales licence area. Further, the arrangement commences on 1 July 2018 (with a transition period from 1^st May) with Nine and SCA working with impacted employees. With the extension into Northern NSW, SCA will be bringing its expertise to sell the NEC product to local and national clients across the Australia region. As per the largest regional market, the Northern NSW licence area serves a population of more than 2.1 million people, with centres in the Gold Coast, Newcastle, Central Coast, Tamworth, Taree, Lismore, Port Macquarie and Coffs Harbour. Apart from the above development, the company has signed a deal with Tennis Australia for rights to all premium tennis played in Australia for 2020 to 2024 seasons. Under the agreement, NEC has acquired the exclusive live rights and catch-up rights including Free to Air, subscription television, streaming, mobile and social media. This will apply to major events like the Hopman Cup and the Brisbane, Sydney and Hobert Internationals. However, it is expected that the winning of rights to tennis might get related to some bit of a loss for the company while losing the cricket broadcasting rights. The total annual cash cost is around $60 Mn over the five-year period. In FY17, P&L cost was reported at ($91.6 million) and in FY18 it is anticipated to be ($47.5 million); and NEC’s FY17 performance was driven by a tightened cost management. The group also expects that existence of major events on a competing network will offset the growth potential to some extent. Meanwhile, investors can book profits given the upward trend with the rise of 50% in the past six months. We give a “Sell” recommendation at the current market price of $ 2.250.


Cash and P&L Costs (Source: Company Reports)

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