Value amid Jittery Earnings Outlook for Travel and Tourism Stocks - WEB, HLO, SLK, FLT

  • Apr 12, 2020 AEST
  • Team Kalkine
Value amid Jittery Earnings Outlook for Travel and Tourism Stocks - WEB, HLO, SLK, FLT

Impact of Coronavirus on travel industry: Impact of the virus on the tourism industry is unquestionable. While the equity markets around the world are crashing, closing borders and prohibited travel are resulting in the travel industry being hit hard. The cancellations of trips are further impacting the income of employees associated with the sector and may lead to cutting millions of jobs and might take several months to recover. This impact, however, depends on how long the pandemic lasts and affects the economy.

The travel restrictions can also complicate the travel of medical experts and can affect the delivery of medical supplies. Many travel industrialists have said that this is the worst hit situation they have ever experienced which is impacting their revenues and earnings. Many companies have withdrawn their guidance for FY20 and have cancelled their dividends.

ALSO READ: How Travel and Aviation Sector is Tackling Coronavirus Crisis?

Let’s look at four travel and tourism stocks and the effects that the COVID-19 pandemic has had on their performance and outlook.

Webjet Limited (ASX:WEB)

Webjet Limited offers a complete range of online travel reservation services for flights, car hire, hotels, tours, and cruises. As on 09 April 2020, the market capitalization of the Company stood at $754.96 million.

Retail Entitlement Offer: The Company, on 01 April 2020, announced an equity raising by way of a fully underwritten institutional placement to raise at least $275 million at an offer price of $1.70 per share.

Decent Increase in Revenue and TTV: The Company recently released its interim results for the period ending 31 December 2019, wherein it reported an increase of 25% in Total Transaction Value (TTV) to $2.3 billion and a growth of 24% in revenue to $217.8 million. The decent financial and operational results enabled the Board to declare an interim dividend of 9 cents per share, which is to be paid on 16 April 2020.

1H20 Financial Highlights (Source: Company Reports)

Webjet Withdraws FY20 Earnings Guidance: WEB is facing withdrawals before travel, which has lowered the outlook on future earnings and cash flow and has led to a material decline in revenues. The Company, looking at the uncertain environment, recently withdrew its FY20 EBITDA guidance. However, WEB is taking actions to ease the impact of COVID-19 by implementing a Company-wide cost reduction programme, which is likely to result in savings of roughly $10 million for the remaining FY20.

Stock Performance: WEB stock closed the day’s trade at $2.940 on 09 April 2020, up by 5% compared to the previous closing price. The stock of WEB has generated negative returns of 69.87% and 59.71% in the past three months and past six months, respectively.

Helloworld Travel Limited (ASX:HLO)

Helloworld Travel Limited focuses on the sales of international as well as domestic travel services and products. The Company also offers ticketing solutions to networks and travel agents. As on 09 April 2020, the market capitalization of the Company stood at $170.87 million.

Record TTV and Decent Increase in Revenue: The Company recently released its results for the half-year ended 31 December 2019 wherein it reported record TTV (Total Transaction Value) of $3,560 million, up by 12.9% over the previous corresponding period. In the same period, the revenue of the Company witnessed an increase of 9.8% to $200.0 million, and NPAT of the Company was reported at $22.7 million. The improved performance was mainly due to the expansion in retail network, continued investment in wholesale product lines and technology, acquisition of new businesses and other operational efficiencies.

1H20 Financial Highlights (Source: Company Reports)

Impact of Coronavirus on HLO: The Company has recently announced that it is taking decisive actions to reduce the outcomes of COVID-19 on travel demand which will impact earnings for the remaining year. To safeguard the results of the coming period, the Company has stated that Chairman & non-executive Directors, CEO & Managing Director of the Company will take no fees and salary for the next three and a half months.

Stock Performance: HLO stock closed the day’s trade at $1.395 on 09 April 2020, up by 1.825% compared to the previous closing price. The stock of HLO has generated negative returns of 72.10% and 69.81% in the past three months and past six months, respectively.

SeaLink Travel Group Limited (ASX:SLK)

SeaLink Travel Group Limited is a provider of tourism and transport services. As on 09 April 2020, the market capitalization of the Company stood at $692.32 million.

Retention of South Australian Contracts: The Company announced on 10 March 2020 that it had been awarded four-passenger transport service contracts with the Minister for Transport which is to be serviced in the Outer North East, East-West and North-South regions. These contracts will commence in July 2020 and are expected to generate revenue of approximately $1.45 billion in the 8-year contract term.

The Company also announced that government public transport authority has agreed on a simple extension of the bus service contracts for approximately 4.5 years till September 2024.

Impact of Coronavirus and Half Yearly Results: The Company recently released its interim results for the period ending 31 December 2019 wherein it reported an increase of 3.8% in underlying NPAT of $13.6 million but a decrease of 43.0% in EPS to 7.3 cents per share. The Company is also monitoring the impact of novel coronavirus and has stated that China represents less than 1% of total Group revenue. SeaLink has a diversified business with over 85% of its revenue from long term government sources. SLK estimates that bushfires and coronavirus will result in a reduction of approximately $5 million in EBITDA of the second half.

2020 Outlook and Focus: The Company is focusing on alleviating the impact of coronavirus on domestic tourism and is capitalizing on Transit Systems Group integration opportunities. SLK also expects increased freight opportunities to Kangaroo Island. The Company has, however, suspended its guidance and has deferred all non-essential projects.

Stock Performance: SLK stock closed the day’s trade at $3.230 on 09 April 2020, up by 1.893% compared to the previous closing price. The stock of SLK has generated negative returns of 31.57% and 30.54% in the past three months and past six months, respectively.

Flight Centre Travel Group Limited (ASX:FLT)

Flight Centre Travel Group Limited is engaged in travel retailing in both the leisure and corporate travel sectors. As on 09 April 2020, the market capitalization of the Company stood at $1.08 billion.

Completed Placement & Institutional Entitlement Offer:  On 07 April 2020, FLT announced the completion of the institutional placement and the entitlement offer raising around $562 million at $7.20 per share. The Company intends to utilize the proceeds to bolster its balance sheet as well as its liquidity position during the current uncertain period.

FLT Boosts Tech Platform with TPconnects Investment: The Company recently announced that it had secured 22.47% interest in TPConnects Technologies LLC and hence strengthened its technology roadmap, which is enhancing the airline-travel agent connectivity. FLT recently raised $562 million under the fully underwritten institutional entitlement offer. These will be used to make a resilient balance sheet with decent liquidity position.

Half-Year Performance: The Company recently released its interim results for the period ending 31 December 2019 wherein it reported its strongest sales since FY16 which resulted in record TTV in all geographic segments, in both corporate & leisure travel of $12.4 billion. In the same period, the Company recorded an underlying PBT of $102.7 million, slightly above mid-point of guidance for the period.  

Priorities of 2020: The Company is increasing investments in sales and account management teams and working towards global rebranding. FLT has launched an analytics upgrade to improve data insights and is offering the widest choice of content for customers. Owing to the fallout of COVID-19, the Company has suspended its FY20 guidance and has cancelled its interim dividend. It will, however, continue to invest in uniquely priced product ranges and will adopt short term strategies to reflect the current trading climate.

Stock Performance: FLT stock closed the day’s trade at $11.560 on 09 April 2020, up by 9.057% compared to the previous closing price. The stock of FLT has generated negative returns of 70.90% and 69.18% in the past three months and past six months, respectively.


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