Shares in the online and bricks and mortar travel agency Helloworld are up around 40% over the past twelve months. Investors may be thinking that the reopening global travel scene may send shares further upwards. Prophet takes a look Should I buy Helloworld Travel Shares in 2021?
Should I Buy Helloworld Travel Shares – About
Helloworld Travel is an online and bricks and mortar travel business with over 2,000 independent franchised agents. HelloWorld operates in both Australia and New Zealand.
The group runs an array of corporate, retail and whose sale businesses both online and bricks and mortar. HLO also have a tour operating segment TTF and Show.
HLO Shares Price
Helloworld travel shares are up about 40% at the time of writing to trade at $2.85/share or a market capitalisation of around $440million.
The shares have a 52-week range of $1.50 – $3.36 and are currently trading about 30% lower than the 52-week high.
Helloworld Shares – Peer Comparison
Helloworld Travel has the lowest market capitalisation in comparison to other ASX Travel Shares such as FLT and WEB. HLO also have a favourable price to book and debt to equity ratio when compared to FLT and WEB.
An interesting metric is also the amount of cash on hand, with Helloworld having $131million of cash on hand which makes up about 30% of the companies market cap being backed by cash. This would be more than enough to repay all company debt of ~$80million. FLT centre is the next closest with nearly 26% of the market cap held as cash on the balance sheet.
On a backward’s looking fundamentals basis FLT and HLO seem to have superior metrics over WEB.ASX.
Flight Centre has had the largest increase in the debt to equity ratio in recent years, going from being the lowest amongst the three companies back in ~2015 to now being the company with the highest level of debt to equity. This is potentially due to the ‘bricks and mortar’ nature of the business compared to HLO and WEB’s web-first approach.
Currently, all three travel companies have suspended their dividend payments which all seemed to be decently regular since at least 2015. We cannot see these companies being able to resume regular dividend payments until uncertainties around the COVID pandemic are removed and international travel re-opened.
Helloworld Shares FY21 Financial Results
Helloworld Travel released its FY21 financial results to the market on 31st August. The headline results provided by the group are as follows: (the full release is included on the companies investor page)
- In FY21, HLO achieved $1.08 billion in total transaction values with revenues and other income of $94.2 million. This was 68% below FY20 results and 85% below FY19 TTV and revenues.
- Normalised EBITDA loss of $14.1m, at the lower end of our guidance, for the 12 months ending 30 June 2021.
- TTV was approximately 15% of pre-COVID levels over much of the year, rising to 25% in Q4.
The group are now also mentioning in their reports and presentations that they are expecting a rapid return for international travel in 2022, saying that there is pent up demand for domestic, international and corporate travel!
Helloworld Shares FY21 – Income Statement
Helloworld Travel was faced with a significantly tough FY21 however with revenue falling to $94million which was down ~70% from 2020.
EPS loss per share reduced from -(56.5)cps in 2020 to (-23.3)cps in FY2021. This may be linked to the companies management of expenses during the pandemic and focus on maintaining a low cost of operations for the period.
Helloworld Shares FY21 – Balance Sheeet
Helloworld’s current asset base has been reduced slightly from FY2020 from $206million down to $176million in FY21. Cash balance for the group remaining relatively consistent during the period at around $131million.
Total shareholder equity increased from the pcp increased slightly from $216million up to $230million as of 30 June 2021.
Helloworld Shares – Dividend History
Helloworld does not currently pay a dividend to its shareholders have not paid a dividend out since their interim dividend back in March 2020.
HLO seemed to pay an increasing dividend yield since 2014 which was typically around a 1% payout to their shareholders.
Helloworld Shares - Ownership and Insiders
HLO Company Share Ownership
Helloworld shares are predominantly owned by the general public with a 30.3% shareholding in the company. This is followed closely by private companies and individual insiders.
Whilst individual insiders only seem to account for 16% of the companies ownership it is important to keep in mind that CEO Burns has a private company under the name Burns Group which also has 13% of the total shares. Hence insiders actually account for
Qantas Airways also owns about 12% of Helloworld shares on the issue with over $55million in stock.
HLO Top 5 Shareholders
|13.24%||Sintack Pty Ltd.||20,530,306||A$59.5m|
|13.13%||Burnes Group Pty Ltd||20,348,287||A$59.0m|
|12.4%||Qantas Airways Limited||19,223,454||A$55.7m|
|9.34%||Fidelity International Ltd||14,475,534||A$42.0m|
|1.83%||Wilson Asset Management||2,844,689||A$8.2m|
The top 5 shareholders in the group are interesting in associations with current CEO Burnes through his holding company and Cinzia Burnes. QANTAS is also a notable shareholder in the business.
HLO Recent Insider Transactions
Recently CEO Andrew Burnes sold over $1.2million worth of stock. We don't see this as being super noteworthy due to having significant exposure to the company with over a 40million shares between Burnes Group, Andrew Burnes and Cinzia Burnes.
Should Burnes complete further significant sales then we may want to delve deeper to ensure there is still significant alignment of personal with company motivations.
|13 Sep 21||-$1,485,801||Andrew Burnes||I||CEO||679,223||AU$2.19|
Should I Buy Helloworld Travel Shares - Prophets Take
The global travel scene from Australia is set to re-open in late 2021 with a potential full reopening in early 2022. In the peer comparison of FLT, WEB and HLO we see multiple superior fundamentals pointing towards HLO, however, backwards-looking fundamentals are not always the best indicator of future growth.
HLO shares have already risen about 40% over the past year, and any potential lockdowns may affect short term investor sentiment towards the stock. Over the long term, the company will likely return to previous levels of growth however, it is hard to say exactly when this will be.
Helloworld previously paid a dividend to shareholders, however, due to uncertain conditions it is hard to say when the company would resume a dividend payment. One can imagine that this will be linked to the company generating profits in the future. The amount of debt on the companies balance sheet should also be covered decently by future earnings as the international travel scene reopens.
We first wrote about the potential opportunities in the travel space back in March 2020 with shares in our favourites FLT and QAN up 17% and 4% respectively since the article. Shares may now be starting to look stretched however it will be interesting to see what prospective investors are willing to pay for potential future earnings.
Prophet whilst realizing that the reopening will be a large thematic in 2022, we are happy with holding these travel companies as part of our exposure to the ASX200. Instead, we have taken a small starter position in ABNB as it seems the rest of the world is reopening at a faster rate than here in Australia.