FLT Shares: Asia Corporate Footprint Extended with Japan JV (ASX:FLT)

Flight Centre Travel Group Ltd [ASX:FLT] is expanding within the Asian corporate travel sector, launching its FCM business in Japan.

The market was largely undecided on what to make of the news, with FLT shares currently slightly up 0.60%.

ASX FLT - Flight Centre Share Price ChartSource: TradingView.com

Despite the travel sector struggling during the pandemic, FLT managed to climb 35% over the last 12 months as the market shifts its focus to a vaccination-led recovery in 2022.

FLT continues corporate travel expansion  

Flight Centre is set to launch its FCM Travel Management business in Japan — the world’s fourth-largest corporate travel market.

This will be done via a joint venture (JV) with Tokyo-based NSF Engagement Corporation.

For context, FCM is Flight Centre’s flagship business travel division and one of the largest travel management companies in the world.

FLT managing director, Graham Turner, noted that Japan was a significant addition to the company’s global FCM network portfolio.

The network now spreads across 97 countries through company-owned businesses and licensing agreements with independent local operators.

Flight Centre said prior to the pandemic, its FCM business was ‘one of the world’s fastest growing travel management companies.

Now, despite the pandemic, the company continued to invest heavily to fast-track recovery and drive future organic growth.  

These investments allowed the company to deliver a strong pipeline of accounts globally, with FLT’s corporate businesses securing accounts backed by pre-COVID annual spends exceeding $US1.4 billion during the 2021 fiscal year.

Graham Turner, FLT managing director, said:

By securing an equity position in this crucial market, we will enhance our ability to win new local, regional and multi-national accounts, while also gaining greater control over and enhancing the service we provide to our existing customers with operations in Japan.

 We believe this will become a very significant business and a valuable addition to our Asian network, which also includes businesses in China including SAR Hong Kong, India Singapore and Malaysia.

 Today’s news follows Flight Centre releasing its FY21 results last month.

In FY21, FLT reported an underlying loss of $507 million, in line with guidance.

Unsurprisingly, corporate total transaction value (TTV) stood at 40% of pre-COVID levels.

 Flight Centre did report having a $941 million liquidity runway as of June 30 against cash burn that during 2H FY21, stood at $30–40 million per month.

FLT share price outlook

 While much of global air travel was grounded, FLT shareholders would have been pleased Flight Centre did not rest on its laurels waiting for the world to open.

Today’s strategic expansion into Japan highlights FLT’s urgency and energy when it comes to its long-term growth.

As FLT managing director Graham Turner noted today, Japan is a key corporate market serving as a business hub for multinational companies.

By securing an equity position in this crucial market, we will enhance our ability to win new local, regional and multi-national accounts, while also gaining greater control over and enhancing the service we provide to our existing customers with operations in Japan.

 We believe this will become a very significant business and a valuable addition to our Asian network, which also includes businesses in China including SAR Hong Kong, India Singapore and Malaysia.

While many travel businesses took a hit during the pandemic, FLT aims to reshape its strategy.

After all, with crisis comes opportunity. And with the travel industry as a whole struggling, there will likely be opportunities to shore up more market share from firms unable to recover.

Flight Centre said today it expects to ‘benefit from its ongoing investments in its platforms, products and people to fast-track market-share growth and gain further competitive advantage as recovery continues.

 Shareholders will likely now monitor how this ‘grow to win’ strategy pans out as Australia and the world begins to open up with higher global vaccination rates.

Market ScreenerSource: Market Screener

Consensus analyst forecasts do show FLT growing its net sales into FY24 but even the forecast FY24 net sales are still expected to come in lower than Flight Centre’s FY19 figure.

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Regards,

 Kiryll Prakapenka,

 For Money Morning.  

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.


Kiryll Prakapenka is an investing autodidact who is passionate about conducting in-depth research on investments. Kiryll brings sound analytical skills to his work, courtesy of his Philosophy degree from The University of Melbourne. A student of legendary investors and their strategies, Kiryll likes to synthesise macroeconomic narratives with a keen understanding of the fundamentals behind companies.


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