Dec 18, 2023

Sentiment: Bullish

Type of Trade: Conservative

Industry: TRAVEL

As per FY23 and the latest AGM update.

Flight Centre is the world’s largest travel agency. Flight Centre has a global travel agent network that extends throughout Australia, New Zealand, United Kingdom, Canada and South Africa. Flight Centre has a global presence with more than 2,500 travel agencies across Australia, New Zealand, the Americas, Europe, the Middle East, Africa, and Asia, as well as an online travel booking website. The company provides a wide range of travel-related services, including flight bookings, accommodation, car rentals, cruises, tours, and more for both leisure and business travelers.

Flight Centre also has several subsidiaries operating under its umbrella, including:

  1. Corporate Traveller – a corporate travel management company based in Australia, New Zealand, the UK, and Canada.
  2. Stage and Screen – a corporate travel management company catering to the entertainment industry based in Australia, New Zealand, the UK, and the US.
  3. Flight Centre Business Travel – a corporate travel management company for small to medium-sized businesses based in Australia, New Zealand, and Canada.
  4. Liberty Travel – a retail travel agency based in the United States.
  5. GOGO Vacations – a wholesale travel provider based in the United States.
  6. Travel Associates – a premium travel agency network based in Australia and New Zealand.
  7. Flight Centre Exclusives – a travel booking platform that offers exclusive deals and packages based in Australia.
  8. Recently acquired 100% of Luxury Travel Holdings Limited (Scott Dunn), with a high margin market segment, growing loyalty amongst customers, and a scalable brand. Scott Dunn’s has been growing into a proven-to-be successful business with TTV above pre-COVID levels from October 2022 onwards, as the following historic trading moment shows.

These subsidiaries operate in different parts of the world, providing travel-related services to customers in their respective regions.

✅ Scott Dunn and Flight Centre’s luxury travel has recovered faster than mass-market post COVID as showed in the following chart.

✅ The group has reported the 2nd strongest full year result achieved (behind FY19).

✅ Recored corporate TTV of $11b.

  • 96% above prior year
  • 24% above previous milestone (FY19: $8.9b)
  • Leisure TTV up 162% year over year to $10b with record contributions from online, independent, & luxury businesses.

✅ Underlying EBITDA of $301.6m, up 265% YoY, above the mid-point in upgraded guidance given ($295m to $305m).

✅ NPAT: $485 million, profit turnaround in FY23.

✅ 18c per share, final dividend payout.

Competitive Advantage

The company has shown a strong recovery trajectory, outperforming the market across key sales metrics

Flight Centre also has the following core supply capabilities.

Key Supply Margin Drivers

FY24 Outlook

The company has been improving across most of its fundamental metrics.
Although the guidance does not show much profit growth from FY23, currently, expect the underlying FY24 profit before tax to be between $270 million and $310 million.

✅ The group expects 2Q PBT to be below 1Q, – reflects seasonality (traditional decrease in bookings during the Christmas holiday period ahead of an increase in demand early in new calendar year).

✅ The company is expecting a heavier 2H profit weighting in line with normal seasonality & with additional impact of Scott Dunn.

🚩Ongoing concern about lack of availability seats on services from Australia to Europe, via the Middle East.

Technical Analysis

(ASX: FLT) is characterised by significant volatility within the large-cap segment, presenting opportunities for multiple trades throughout the year, each yielding profit margins within the range of 20–30%. Over the past 12 months, if one had initiated a position in FLT, their investment would have experienced a commendable 30% appreciation, indicative of the stock’s consistent recovery trajectory since the onset of the pandemic-induced market crash.

The current technical analysis reflects an ascending formation in FLT’s trading pattern, marked by the occurrence of successive higher highs and higher lows. This pattern suggests a sustained bullish trend, underscoring the stock’s resilience and positive momentum.

Barring any major disruptions in the macroeconomic landscape, the outlook for FLT over the next six months indicates a trading range between $17 and $24. This range-bound projection is based on the stock’s historical performance and its current upward trend, assuming a continuation of prevailing market conditions.

A recently detected double bottom formation is around the $18 mark, indicative of a possible short-term reversal in the stock’s recent fall and potentially serving as a precursor to a bullish breakout. Given this observation, there is a plausible scenario where FLT could experience a breakout into the $20s in the short term.

The stock is currently trading at technically fair price.

Should I Buy (ASX: FLT) Now?

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