Bell Potter tips a bigger and better Flight Centre when recovery takes off

Flight Centre’s predicted recovery from the pandemic will come with higher profit margins, according to brokers Bell Potter.


Jan 12, 2021, updated Jan 12, 2021
Flight Centre has started a significant turnaround (Photo: Julian Smith/AAP PHOTOS)

Flight Centre has started a significant turnaround (Photo: Julian Smith/AAP PHOTOS)

Bell Potter has a $19 a share target on Flight Centre and said the company’s significant restructure since Covid-19 provided a “value driver” which is leveraged to a rebound in international travel. Flight Centre shares are currently trading at $15.21.

“Despite near term uncertainty, we expect FLT to restore earnings at higher margins with the removal of structural costs and market leadership from FLT’s corporate business to be the key drivers of value over the long-term,” Bell Potter said.

“With trading conditions gradually improving since the March/April lows, a widely distributed COVID-19 vaccine provides upside bias to FLT’s 2021 recovery profile.”

In Bell Potter’s annual outlook it has also highlighted Technology One, Domino’s and Aeris Resources as companies to watch in 2021.

It has put a price target of $10 on Technology One which it said the Adrian Di Marco-headed company had cash of $100 million and had a competitive advantage through its Software as a Service solution. The project to switch customers over to the new system was now more than 50 per cent complete.

Bell Potter said Technology One was starting to reap the benefits of greater recurring revenue – through the sale of more products – and a higher margin (through economies of scale).

“This combination will, in our view, drive double-digit earnings growth for years to come and, while not cheap, makes the full year 2021 price to earnings ratio of around 40-times look reasonable. The company also has net cash of well over $100 million which provides the potential of special dividends and/ or a share buyback,” the broker said.

The acquisition of the Cracow Mine in north Queensland was the basis of a transformational 2020 for Aeris Resources, the broker said.

Bell Potter said the mine had delivered an excellent maiden quarter for AIS, with production and costs beating our expectations. Combined with a good performance from Tritton, AIS cut its net debt position from ~$60m to $28.3m over the quarter. A

“The Cracow acquisition, the strengthening of the balance sheet, the restructure of the share register and some exciting recent exploration success at Tritton is, in our view, just beginning to gain recognition in the market.

“We forecast strong earnings and cash flow growth in 2021 on low multiples and see the opportunity for a material re-rating for AIS in 2021.”

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