Flight Centre Travel Group Ltd

L1 Capital Long Short Fund continues to hold its position in Flight Centre Travel Group despite a 29% decline in shares following a softer Q1 trading update, primarily due to impacts from airfare price deflation and downtrading in corporate accounts. While near-term volatility may persist due to moderating travel activity, L1 Capital remains optimistic about the company's transformation. Flight Centre has significantly improved its efficiency and productivity since the pre-COVID period. On the Leisure side, it has reduced its retail footprint, focusing on more profitable locations and shifting towards luxury and independent travel networks. The corporate travel business continues to grow, now ranking as the third-largest global corporate travel manager. The company aims for a 2% underlying profit before tax (PBT) margin in the medium term, which would result in a significant increase in PBT. Trading at approximately 13x FY25 consensus earnings and with a strong balance sheet, L1 Capital views Flight Centre as an attractive opportunity and has used the recent sell-off to increase its position.

L1 Capital Long Short Fund has updated its investment thesis on Flight Centre Travel Group Ltd, continuing to hold the position despite recent share price weakness following a softer Q1 trading update. The fund attributes the near-term pressure to airfare deflation and some corporate client downtrading but remains constructive on the company's medium-term outlook. L1 Capital Long Short Fund continues to hold because it believes Flight Centre is a structurally stronger and more efficient business than it was pre-COVID. On the Leisure side, the company has streamlined its retail footprint, focusing on higher-return locations and expanding into luxury and independent travel segments. Meanwhile, its Corporate division continues to perform well, now ranking as the third largest corporate travel manager globally. Management is targeting a 2% underlying PBT margin, which would represent more than 50% growth from FY24 levels. Despite short-term headwinds, the fund sees value in Flight Centre’s transformation and long-term earnings potential, noting the stock trades at approximately 13x FY25 consensus earnings with a solid balance sheet. L1 Capital Long Short Fund has used the recent pullback as an opportunity to increase its position.

Alpha Plus has updated its investment thesis on Flight Centre Travel Group Ltd (FLT), reflecting a shift in confidence regarding the company’s earnings outlook. The fund manager reduced its position in FLT, citing a decline in conviction around the sustainability and predictability of future earnings. A key concern highlighted is the company’s larger-than-usual reliance on second-half performance, which introduces added risk and uncertainty. While Alpha Plus acknowledges that FLT’s currently depressed valuation may offer some downside protection, the team has identified more compelling opportunities in other areas of the market. As a result, Alpha Plus has chosen to reallocate capital to positions where it holds higher conviction in the risk-adjusted return potential.