Maybe. Maybe. After all, there are plenty of prawns out there.
Let's explore this a little further...
Between late-2018 and late-Feb, 2020 the FLT SP was rangebound between $34 and $44. Let's be slightly generous say it averaged ~$40 during that time - a time in which there was very strong growth, leading FLT to be on track to deliver a record TTV in 1H20, before the travel world got turned on its head. SOI was 101m shares. This gives an average MC of ~$4b for FLT during a period of very solid operational performance and record TTV. We'll revisit this later.
Fast-forward a couple of months to this brave new world in which the company has been forced to (permanently) close more than 50% of its global leisure shops, including 40% of Australian leisure shops, initially stand down 30% (6,000 of 20,000) of its global workforce (probably more to follow), and enter into a raft of cost saving initiatives designed to ensure that can weather the storm - a storm in which international and domestic travel has all but ceased for the immediate future (and, as an aside, the international cruising.market now has a bigger PR problem than the Catholic Church - albeit for vastly difference reasons). We now find a freshly recapitalised FLT with 198.5m SOI after dust settles (let's round it up to a neat 200m shares for the sake of simplicity) with a bank balance bolstered by the addition of $679m (net) cash raised + $200m additional borrowing headroom, but (unfortunately) very little in the way of income for the foreseeable future, which will lead to an unavoidable cash burn for the foreseeable future that nobody knows with any degree of certainty will end.
This leaves us with the question of an appropriate MC for the recapitalised FLT, given the current circumstances.
At Thursday's closing price of $11.56 we have a market-voted MC of $2.3b.
At $14 the MC becomes $2.8b.
At $15 the MC becomes $3b.
Now, let's contrast this extraordinary turn of events that swung FLT from a profitable going concern that was setting new record TTVs in which the market rated and generally agreed (via open daily auction) over the preceding 15 months a MC of $4b... against today's reality.
The challenge for each punter is to figure out what a realistic MC should be, given the known likely cash burn vs. the uncertainty surrounding returning to full operational (profitable) status - remembering, of course, that 40-50% of the leisure business has been permanently closed. That's not to say that it cannot be rebuilt in due course or ameliorated by other strategic initiatives relating to growing other segments (corporate) which will take time to bear fruit when ops are eventually restored.
Having the relatively stable $4b MC yardstick of a version of this company that was setting records as recently as two months ago to compare against current circumstances provides a remarkably rare and stark point of difference for punters to compare against. Yes, the current troubles will all pass in time. The question is when? Which gives rise to the question of after how much freshly raised cash will have been burned through in the meantime? And into what operating operating landscape will the restart occur? And how long will it take to recover back to previously-enjoyed levels to justify a $4b MC?
After everything has been weighed up, the questions that we must each ask (and answer for) ourselves is whether an appropriate MC should be 75% of that which it was pre-CV19 (i.e. $3b - $15/share)? 50% ($2b - $10/share)? More? Less? At what point does the Greater Fool Theory become a live threat to personal wealth?
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