##{"id":58830,"date":"2011-09-13T10:03:17","date_gmt":"2011-09-13T00:03:17","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/09\/13\/still-value-in-flight-centre\/"},"modified":"2011-09-13T10:03:17","modified_gmt":"2011-09-13T00:03:17","slug":"still-value-in-flight-centre","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/09\/13\/still-value-in-flight-centre\/","title":{"rendered":"Still Value In Flight Centre"},"content":{"rendered":"

\n\t– Solid earnings growth outlook for Flight Centre
\n\t– Early FY12<\/span> trading in line with guidance
\n\t– Stock offers value according to Moelis<\/span>
\n\t– Buy ratings dominate broker views<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tIn FY11<\/span> Flight Centre ((FLT<\/span>)) delivered earnings per share (EPS) growth of 22%, a result that followed on from better than 100% EPS growth recorded in FY10<\/span>. As stockbroker Moelis<\/span> notes, FY11<\/span> was the first time Flight Centre delivered profits in all 10 of the countries where wholly owned businesses are operated.<\/p>\n

\n\tRecord earnings were achieved in Australia, Canada, India and Dubai, Moelis<\/span> taking the view this was helped by a supportive operating environment. For Flight Centre this meant stimulatory global airline ticket prices and sustained strength in the Australian dollar helping the domestic outbound travel market.<\/p>\n

\n\tNot only were results for FY11<\/span> a record, but Moelis<\/span> notes the lift in EBIT (earnings before interest and tax) margins implies some operational improvements were achieved and Flight Centre was able to leverage its scale.<\/p>\n

\n\tAlso boosting earnings was an improvement in the US market, Moelis<\/span> noting EBIT from that market for FY11<\/span> of $1.5 million was a solid turnaround from a loss of $2.3 million the previous year. The improvement followed a restructuring of the US business.<\/p>\n

\n\tFurther earnings growth is expected in FY12<\/span>, Moelis<\/span> noting management has guided to profit before tax for the current year of $265-$275 million. This would be an increase of 8-12% over the FY11<\/span> result.<\/p>\n

\n\tWhile achieving this target may be a challenge given current tough operating conditions, Moelis<\/span> notes trading in both July and August has been consistent with this guidance being achieved. As a result no changes to earnings forecasts have been made.<\/p>\n

\n\tIn EPS terms, Moelis<\/span> expects Flight Centre to earn 187.3c<\/span> in FY12<\/span> and 209.2c<\/span> in FY13<\/span>. These forecasts compare to consensus EPS estimates according to the FNArena<\/span> database of 187c<\/span> and 201.3c<\/span> respectively.<\/p>\n

\n\tOn the stockbroker's numbers, Flight Centre would be trading on a FY12<\/span> earnings multiple of around 10 times, a level seen as attractive given expectations of further growth longer-term from an increase of around 10% in global store numbers from a current 2,243. The earnings multiple for Flight Centre would fall to just over eight times in FY13<\/span> according to present estimates, notes Moelis<\/span>.<\/p>\n

\n\tMoelis<\/span> is not the only broker to identify value in Flight Centre, as the FNArena<\/span> database shows a total of seven Buy ratings and just one Hold recommendation. The sole Hold comes from Macquarie and reflects a somewhat cautious view given a softening demand environment.<\/p>\n

\n\tBut the valuation argument dominates and underpins Buy ratings from the likes of RBS<\/span> Australia, Citi<\/span> and BA Merrill Lynch. Also supportive of positive broker views is an attractive dividend yield, Moelis<\/span> forecasting a yield of 5.0% in FY12<\/span> and 5.6% in FY13<\/span> based on expected distributions of 94c<\/span> and 105c<\/span> respectively. Dividends for Flight Centre are currently fully franked.<\/p>\n

\n\tThe consensus price target according to the database stands at $23.79, which is comfortably above Moelis's<\/span> target of $22.50.<\/p>\n

\n\tShares in Flight Centre have moved within a trading range over the past year of $17.44 to $25.12. At current levels the Flight Centre share price implies upside of of around 28% to the consensus price target in the FNArena<\/span> database.<\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"