UBS upgrades Flight Centre
June 1, 2010
UBS has upgraded FLT to BUY following yesterday’s company update. Flight Centre recently upgraded pre-tax profit guidance by 11%-18% to $190m-$200m.
UBS notes that outbound travel demand continues to remain robust, buoyed by relatively low airfares and a historically high Aussie dollar. Meanwhile, the UK business, which contributes around 10% of FLT’s EBIT, continues to improve, driven by market share gains despite tough conditions.
The broker has forecast 13% EPS CAGR from 2010-2013, driven by improved corporate bookings, which are still 15% below peak levels, while leisure sales are underpinned by steadily improving airline yields.
In addition, higher margin direct contracting now represents 70% of leisure package bookings, which compares to just 50% in 2009.
More generally, UBS argues that FLT should return to peak earnings in 2011 and that the resumption of growth should translate into strong cash flows, increasing the potential for capital management initiatives.
The broker concludes that given domestic market share gains, a strong environment for domestic outbound, its view may prove conservative.
UBS notes that outbound travel demand continues to remain robust, buoyed by relatively low airfares and a historically high Aussie dollar. Meanwhile, the UK business, which contributes around 10% of FLT’s EBIT, continues to improve, driven by market share gains despite tough conditions.
The broker has forecast 13% EPS CAGR from 2010-2013, driven by improved corporate bookings, which are still 15% below peak levels, while leisure sales are underpinned by steadily improving airline yields.
In addition, higher margin direct contracting now represents 70% of leisure package bookings, which compares to just 50% in 2009.
More generally, UBS argues that FLT should return to peak earnings in 2011 and that the resumption of growth should translate into strong cash flows, increasing the potential for capital management initiatives.
The broker concludes that given domestic market share gains, a strong environment for domestic outbound, its view may prove conservative.
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