Legal actions against VGI Partners, page-39

Corporate Travel Management (CTD) Sentiment takes a hit Recommendation Hold (unchanged) Price $20.05 Target (12 months) $21.80 (previously $28.90) Analyst Tim Piper 612 8224 2825 Authorisation TS Lim 612 8224 2810 GICS Sector Hotels Restaurants and Leisure Expected Return Capital growth 8.7% Dividend yield 2.2% Total expected return 10.9% Company Data & Ratios Enterprise value $2,162m Market cap $2,175m Issued capital 108.5m Free float 70% Avg. daily val. (52wk) $10.7m 12 month price range $19.42 - $33.87 Price Performance BELL POTTER SECURITIES LIMITED ACN25 006 390 7721 AFSL 243480 Page 1 (1m) (3m) (12m) Price (A$) 30.49 29.00 23.80 Absolute (%) -34.34 -30.97 -15.88 Rel market (%) -28.08 -23.81 -13.91 Short report to have destabilising effect CTD has provided a response to a recent negative report with a detailed announcement responding to each of the 20 “red flags” contained in the short report. The report focussed on CTD’s accounting practices, disclosures, earnings quality and office footprint among other concerns. The release has seen the share price de-rate from a FY19e P/E of ~29x to ~21x. Given the recent history of other prominent public short campaigns (such as Blue Sky and Quintis) we expect the report will have a destabilising effect on CTD’s share price at least in the near term, and as such we retain our Hold recommendation. Guiding to top end of range On a positive note CTD has also provided an upbeat trading update at its AGM, noting that FY19e has begun strongly with client wins at record levels and client activity remaining favourable. We also note key foreign currency exposures (namely USD and GBP) are sitting favourably compared to guidance assumptions. As such, CTD has guided to a FY19e EBITDA of $150m which is at the top end of the $144-150m EBITDA range previously provided (BPe $149m). As flagged at the FY18 result, additional expenses in the Americas division will weigh slightly on the 1H19 result and EBITDA in that division is expected to be flat on PCP. Earnings Changes and Valuation We have not made any changes to our earnings forecasts and our FY19e EBITDA remains unchanged at $149m (in line with guidance). Given the short report focuses on issues such as accounting practices and financial disclosure, we do not expect any material impact from an operational or client activity perspective. However with other recent prominent activist short campaigns in mind, we feel the near term risk profile of CTD has increased. As such, in our valuation we increase our WACC, decrease the premium in our DCF valuation and also decrease the target forward P/E multiple. The net result is a decrease in our Target Price to $21.80 (prev. $28.90) and we retain our Hold recommendation. Absolute Price Earnings Forecast June Year end 2018a 2019e 2020e 2021e Sales ($m) 371.3 454.4 510.4 563.6 EBITDA ($m) 125.4 149.2 176.0 198.3 NPAT (normalised) ($m) 86.0 103.1 123.8 141.3 NPAT (reported) ($m) 76.6 94.0 114.6 132.7 EPS normalised (cps) 80.0 94.7 112.5 128.5 EPS normalised growth (%) 29.5% 18.3% 18.8% 14.2% PER (x) 25.1 21.2 17.8 15.6 EV/EBITDA (x) 17.2 14.5 12.3 10.9 Dividend (¢ps) 36.0 45.0 53.0 62.0 Yield (%) 1.8% 2.2% 2.6% 3.1% Franking (%) 71% 50% 45% 45% FCF Yield (%) 3.7% 4.4% 5.8% 6.8% ROE (%) 19.7% 19.9% 20.6% 2