Look At The Business Journey Of 3 Travel Stocks – WEB, FLT And CTD

  • Jun 19, 2019 AEST
  • Team Kalkine
Look At The Business Journey Of 3 Travel Stocks – WEB, FLT And CTD

Travel is one of the key industries with a direct contribution to the Australian economy. There were millions of International visitors in the past years with three states majorly visited by international tourist, namely New South Wales, Victoria and Queensland. Let’s have a look at these three stocks WEB, FLT and CTD listed on ASX.

Webjet Limited

The consumer discretionary sector company, Webjet Limited (ASX: WEB) is involved in providing a range of services with online ticket booking for cruises, car hire, tours and hotels. It was officially listed on ASX in 1997. On 18th June 2019, the company released its Investor Session details, wherein it introduced the blockchain technology, Rezchain and suitable “off the shelf” solution, Rezpayments. Additionally, to put more light on the blockchain side of things, data on a blockchain can be read by any computer contributing capacity with transparency as its primary aim. On a public blockchain, the transaction competes for attention, and there’s no such thing as FIFO.

What is Rezchain?

The Rezchain is a part of WebBeds, which is a B2B division of the company. WEB is the first travel company with a fully functional blockchain, including the processing of transactions between two parties every day. Rezchain has proven to be a critical component for the company to move away from “8/5/3” structure to an “8/4/4” (8% revenue/TTV, 4% costs/ TTV and 4% EBITDA/TTV) in its WebBeds business by FY22.

There are many different components of hotel reservations that can be mismatched during the life of booking, such as price, booking status, currency, room type, duration and board basis. Mismatches are often found months after bookings are created and travelled, making reconciliation and settlement a painful and counter-productive process. This is where Rezchain comes into play to solve these problems and/or discrepancies. It is a simple solution designed to allow any two parties to verify the booking data matches, with “handshakes” to occurs each time a booking is made or updated and the parties are notified if any discrepancies exist that could lead to a dispute.

What is Rezpayments?

The Rezpayments is a secure, cloud-hosted PCI tokenisation service, which is easy to implement into workflows, allowing the company to easily implement a solution that captures the customer’s credit card data and directs it to Rezpayments, where it is exchanged for a token, and that token is stored in the user’s systems. All companies that accept credit card payments are required to comply with the PCI’s Data Security Standard. Rezpayments creates a flexible, cost-effective solution in order to solve a complex and highly critical component of the payment lifecycle.

Looking at the financials. In 1H FY19, the company witnessed a rise of 136% to $30.1 million in EBITDA as compared to $12.8 million 1H FY18.

At the time of writing, i.e. on 19th June 2019, AEST 02:30 PM, the stock of WEB was trading at $14.990 per share, with a market capitalisation of $2.06 billion. The stock has provided returns of -12.14% and -0.47% for the one month and three month period, respectively.

Flight Centre Travel Group Limited

Flight Centre Travel Group Limited (ASX: FLT) operates in the leisure and corporate travel sectors. It has in-destination travel experience, which includes hotel management, tour operators, etc. It was officially listed on ASX in 1995. The company lately released its Morgan Roundtable Presentation, which was primarily focused on the operation and future strategies. As per the presentation, FLT is a top leisure travel company and a market leader in Australia, NZ and South Africa and a global force in the travel sector. The company has a corporate presence in more than 90 countries, including partner network.

Looking at the organic growth model of the company. It is investing in sales and marketing to deliver value for its customers, growing through winning and retaining customers with no large scale acquisitions. Historically, some small acquisitions have complemented the organic growth and gained a footprint in Nordics and Casto markets. The company is focused on innovation with ongoing investments in key platforms in order to enhance the traveller experience, access data and to deliver new mobile solutions and achieve better cost efficiencies. Recently, the company acquired a 25% interest in The Upside Travel Company to fast-track its growth in the SME sector. In addition, the investment reflects the company’s strategy of developing a next generation SME platform that blends FLT’s expertise with best-in-class technology in order to drive an optimal traveller experience.

In the recent release, the company reported that it has downgraded its profit guidance from $390 million - $420 million to $335 million- $360 million for 12 months to 30th June 2019. Separately, the company is continuously focused on Australian leisure business to improve margin, increase TTV and slow cost growth after challenging 1H FY19. FLT’s swiftly growing North America business continues to perform but is now tracking against a strong trading period during FY18.

At the time of writing, i.e. on 19th June 2019, AEST 02:45 PM, the stock of FLT was trading at $42.280 per share, up 2.052% during the day’s trade with a market capitalisation of $4.19 billion. The stock has provided returns of 0.95% and -3.74% for the one month and three month period, respectively.

Corporate Travel Management Limited

An Australian registered company, Corporate Travel Management Limited (ASX: CTD) is engaged in providing travel management services to the corporate market. It was officially listed on ASX in 2010. In the recent release, the company stated that one of the company directors, Ewen Crouch has changed his stake in the company by acquiring 2,500 fully paid ordinary shares at the consideration of $55,099.46 on 5th June 2019. The company has lately strengthened its senior management capability, with the current global Chief Financial Officer will focus on its growing operations and expansion in Europe to support the continued development. Additionally, CTD is in the process of recruiting a new Global CFO in Australia to work the global management team and the company’s Board.

Furthermore, the company wants to control its destiny by futureproofing its technology and developed, integrated end-to-end solution for clients, including: SMART portal, diagnostic widgets, BI analytic reporting with Lightning OBT, user-centric, now operating in all four regions. CTD built a global corporate travel business ex-Australia, which is forecasted to achieve TTV of $6.5 billion for FY19, representing under 1% of the total global corporate travel market.

Looking at the financials. The operating cash conversion for rolling seven-year average has neared 100% through the expansion of Phase 1 and Phase 2 and CTD expects to achieve around 100% operating cash conversion over FY19 and beyond.

For FY19, the company is tracking at the top end of underlying EBITDA guidance of $150 million, and for FY20-21, it is targeting 15% organic growth p.a., as has been provided by the company in its Investor Presentation.

Turning to the performance of financial metrics. The company has reported satisfying numbers. The net margin of the company amounted to 19.3% in 1H FY19 as compared to the industry median of 10.4%. This implies that the company is effectively converting its top line into the bottom line. The current ratio of the company stood at 1.48x in 1H FY19 in comparison to the industry median of 1.11x, which indicates that the company is in a sound position to address its short-term obligations. The return on equity for the period was 7.9% as compared to the industry median of 5.6%, demonstrating the returns it has provided to shareholders when compared to the broader industry. (Source: Thomson Reuters)

At the time of writing, i.e. on 19th June 2019, AEST 02:45 PM, the stock of CTD was trading at $22.800 per share, with a market capitalisation of $2.46 billion. The stock has provided returns of -8.62% and -5.34% for the one month and three month period, respectively.


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