Harvey World Travel
The Sunday Age
Sunday April 18, 2004
It would have been an inspired decision. In August last year, the air ticket retailer Flight Centre, one of the market's darling stocks in recent years, was travelling well as it approached $24 after jumping from $17.40 on April 28, 2003. It was still well shy of its 2002 high of $28.50 on June 7, 2002, but plenty of investors would have been comfortably in the money around $24.
At the same time, Harvey World Travel was showing nascent signs of recovery.
Having traded between 40 and 80 for more than two years, the franchised retail travel agency chain was showing signs of life. The loss of nearly $1 million in the year to June 30, 2002, was being turned around, and the smart money was boarding this flight. The really smart money was doing it by offloading Flight Centre scrip, now about $18, while HWT was $1.40 on Friday.
HWT is getting runs on the board. Based on last year's profit of $3.1 million, it is trading on a historical price-earnings ratio of 17.5 times. At that time, chairman Norm Fricker said: ``The strong trading turnaround, which began in March 2002, has continued through the 2003 financial year, with new profit streams emerging from the business plan initiatives set over the past two years. The buoyant second-half profit of $1.9 million, an improvement of more than 30 per cent on the previous year, is a measure of the success of our medium-term planning."
No doubt Fricker was pleased that the previous year's red ink was now black. But his crystal ball would have been telling him HWT was set for an exciting and profitable journey in the 2004 financial year. In the event, he has been proved right.
Earnings for the six months to December 31, 2003, were up 23 per cent to $1.5 million. Based on last year's spread of earnings, it is realistic to project a full-year profit to June 30, 2004, of $4 million, which, if achieved, will have HWT on a prospective price-earnings multiple of 13.6 times. At this level, it does not look too expensive.
Shareholders received a 3 interim dividend for the past six-month period. Assuming directors declare the same for the second half, a payout of 6 will have the stock yielding 4.3 per cent, handy insurance if the share price stalls or falls. Tourism stocks are volatile. Events such as September 11 and Bali can take a huge toll. But those extraordinary events aside, HWT seems on the right flight path.
Stock code HWT
Last price $1.40
Sector Tourism
Business Franchised retail travel agency chain operating locally and overseas
Market cap $54 million
Dividend (30/6/03) 4.5
Yield 3.2 per cent
P-E multiple (30/6/03) 17.5 times
MD Barry Mayo
© 2004 The Sunday Age
