FLT Analysis Due Diligence

Should I Buy Flight Centre Shares 2021 Highlights

Flight Centre’s share price has been bid down massively following the COVID pandemic. This saw the share price crash a massive 85.92%. Does the current discount present a buying opportunity to investors?

About Flight Centre Shares

FLT’s Principal Activity is travel retailing in both the leisure and corporate travel sectors, plus in-destination travel experience businesses including tour operations, hotel management, destination management companies (DMCs), and wholesale. Source: Market Index

FLT ASX Share Price

Just prior to the COVID recession Flight Centre shares had performed well pushing to an all-time high of 75.13 in August of 2018. Today the Flight Centre share price is $15.24, which is in the middle of its 52-week range of 9.76-20.16. This is still down around 80% since its peak. It’s up 6.57% this year.

In comparison, the broader market is up 27.56% this year and has fully recovered from the recession pushing it to new heights.

Should I Buy Flight Centre Shares: Financials

half yearly results:

THE Flight Centre Travel Group (FLT) continues to respond to the challenges posed by COVID19 and the unprecedented travel restrictions that are in place to slow its spread.

In releasing its 2021 fiscal year (FY21) first half (1H) accounts, FLT said today that while global trading conditions remained volatile, results had gradually improved thanks to targeted cost base reductions and revenue increases during the period.

Since the crisis escalated in March 2020, the company has now:

• Lowered its cost base by 66% (representing a $1.9billion annualized saving) without jeopardizing either its investment in key growth drivers or its ability to rebound quickly when conditions improve
• Continued to generate total transaction value (TTV) and revenue in a prevaccination, domestic-only travel world – December revenue was at its highest point since travel restrictions were introduced globally in March 2020
• Delivered month-on-month reductions in net operating cash outflow during the 1H;
• Maintained a $1.2billion liquidity runway to help it withstand an extended downturn or capitalize on opportunities during the recovery phase, which could now be fast-tracked with the world’s largest-ever vaccination program underway

Should I Buy Flight Centre Shares: Technical Analysis

The general consensus within the Technical Analysis community is currently bearish on FLT shares. The moving averages and Technical Indicators seem to indicate a Strong Sell.

FLT Shares: Cap Raise and Bail Outs

In the midst of the recession Flight Centre was desperate to get a piece of the government $1.2 billion bailout.

With little to no government aid FLT managed to bail themselves out with a capital raise announced in April 2020.

Here are the details:

• •A ~$700 million fully underwritten equity capital raising, comprising a ~$282 million institutional placement (Placement) and a ~$419 million 1-for-1.74 accelerated pro-rata non-renounceable entitlement offer (Entitlement Offer) (together, the Equity Raising);
• •A $200 million increase in commitments from existing lenders
• Confirmation that the previously announced cost control initiatives and cash preservation initiatives are anticipated to reduce annualised operating expenses by approximately $1.9 billion2 (to approximately $65 million per month, by the end of July 2020).

This placment was largely successful raising approximately A$562 million at A$7.20 per New Share.

The Travel Sector Crash

The travel sector has realized massive losses over the past year. With the three big-name brands (QAN, FLT, WEB) now being available at discounts of around 30-50%, while the market has largely recovered, investors are starting to see opportunity in these stocks that have been left behind.

For the foreseeable future international table is off the tables. The latest federal budget has indicated that Australia is likely to be closed off from international travel until at least mid-2022.

Flight Centre Shares: Future Prospects

At this stage, the future prospects are obviously unclear. From the above statics, we clearly see the international travel sector has died for the foreseeable future. On the other hand, we are starting to see a strong recovery in domestic travel. FLT is relying on this strong return as they have significant exposure to domestic/regional travel.

“FLT is targeting a return to breakeven in both leisure and corporate travel during the 2021 calendar year on the basis that domestic borders are likely to open permanently and some (low risk) international travel may be permitted”

The return of domestic travel has had a positive impact on the return on revenues as bookings are returning.

Full Analysis if Interested

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