Crash landing or turbulence?
As you would be well aware, nobody is able to control share prices. Even the very best quality companies, purchased at steep discounts to intrinsic value, can fall in price over a week or a month or even a year. And so we aren’t surprised to see the share price of one of our holdings – Flight Centre Travel Group Ltd (ASX: FLT) – not flying as high as we’d like.
Amid a plunging Australian dollar (remember, however; outbound air travel is driven by cheap airfares rather than currency) and concerns that Ebola-related bans on travel will impact the company, one of our brokers had breakfast with Flight Centre founder and CEO Graham Turner, and reported back.
It was noted that Flight Centre is now trading on 14.3 times and 13.1 times FY15/16 earnings.
According to our contact, Mr Turner expressed little to no consternation about Ebola and the Australian dollar.
You might recall the business has survived SARS, Bird Flu, wars in the Middle East and the September 11 Islamic group al-Qaeda terrorist attacks, and in each case the setback was indeed temporary. What Mr Turner did note, was that during these periods demand backs up, producing an inevitable bounce when circumstances return to normality.
“War and pestilence have always been around,” Turner was quoted as saying.
Our contact noted that Mr Turner spent some time articulating his 20-year plan and how he envisaged the business would look in 2035.
The vision is reported to have included a global retailer with seven global divisions, which are listed below.
- Travel company
- Tour operator
- Student and youth brand
- FX business and currency exchange business
- Recruitment company
- Financial planning business
- Global bike business
The broker told us that their desk is split on whether this stock has further to fall or not.
We wish them luck with that prediction.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Min Jian (David) Tan
:
Hi Roger, in light of the recent profit downgrade from Flight Centre… Do you still maintain your views? Appreciate any thoughts you may be able to share.
Roger Montgomery
:
There is no doubt retailers are doing it tough in Australia. That could worsen before it get’s better. In the very long run, one might expect all will be well – just keep an eye out for disrupters too.
Roger Taylor
:
Such great numbers over the last 10 years. Strong, consistent ROE, ROC, EPS growth and very little debt.
For those of us that don’t currently own their shares, let’s hope the price does fall further to give us an opportunity to purchase at a reasonable discount to intrinsic value.