Up cycle now, page-152

Thanks for the Morgans note

here is the Goldman Sachs report from Commsec

Flight Centre Travel Group (FLT.AX):

First Take: 2H21 underlying losses expected in line with 1H21 losses; Neutral

4 May 2021 | 9:46AM AESTFlight Centre has provided an update regarding the ongoing trading conditions and outlook on 2H21 profitability. Key takeaways are:

Sales revenue in March, (+32.7% mom) has accelerated after a subdued January and February with quarterly TTV ahead of A$1bn (GSe 2H21 A$2.2bn), an improvement vs. our expectations. Australian leisure and corporate businesses and US Leisure business has been noted as strong contributors to the improvement.

Corporate business is tracking at c. 29% of pre-pandemic levels at the end of 3Q21 (GSe for 2H21 at 28%) and Leisure businesses at c.14% of pre-pandemic levels (GSe for 2H21 14.5%). Australian corporate margins have been noted to be at lower than normal levels.

flightcentre.com.au has been noted as now generating c.30% of sales, this is largely in line with GSe expectations of e-commerce channels (globally) representing c.30% of TTV in 2H21.

Fixed cost continues to track at c.A$70mn per month while variable costs have been increasing. Jobkeeper subsidy was c. A$5-7mn per month previously.

The Group reported cash of c.A$1.5bn at the end of 3Q (ahead of GSe at the end of 2H21 at A$1.4b) with liquidity of c.A$1.1bn.

The group continues to target a return to profitability (at PBT) in FY22, GSe -A$11.9mn) and expects underlying losses in 2H21 to be broadly in line with 1H21 (GSe for 2H21 improvement of c.A$34mn vs. 1H21).

Bottomline: Overall, topline recover is noted to be recovering ahead of GSe, an encouraging read on travel recovery and FLT maintaining a strong market position. However, profit outlook for 2H21 remains below our expectations as a result of increasing shift towards lower margin e-commerce and corporate businesses with corporate especially trading at lower than normal revenue margins.

Valuation: We value FLT on a 50:50 blended EV/EBIT based SOTP (A$19.70) and DCF (A$20.20)resulting in a 12m Target Price of A$20. We are Neutral rated on FLT.

Key upside risks are: Faster-than-expected recovery in trading environment, significant market-share gains in the online channel, travel bubbles.

Key downside risks are: Emergence of COVID-19 strains which could make vaccines less effective, further decline in Brick'n'mortar travel sales, increased competition in the corporate segment.