Tip Update: Buy at 572p
- Tip style
- Risk rating
- MEDIUM TERM
- Our previous tip
- We said BUY at 401p on 10 Jul 2017
- Tip performance to date
The after-effects of the collapse of Monarch airlines are still working their way through the European travel industry. In the case of On The Beach (OTB), it was £1.1m-worth of lost bookings during the six months to March. Monarch’s demise effectively ripped out about 15 per cent of flight capacity to beach destinations during the period, but it also deterred those travellers who choose to holiday in the winter (when it’s cheaper), as prices for remaining seats increased markedly. Chief executive Simon Cooper said other airlines are in the process of filling these gaps, but there is some lead time until agreements are reached.
Outside of Monarch, On The Beach is making progress. Daily unique website visits grew by a quarter to 34.1m, while repeat purchases increased by 2.6 per cent to 42.9 per cent of visitors. On The Beach has continued to invest in its technology platform to make it easier for customers to use, especially since well over half of UK traffic now comes via smartphones. Sunshine.co.uk, which the company acquired last year, is also now on the same platform.
Analysts at Numis expect pre-tax profits of £34.2m in the year to September 2018, giving EPS of 21.2p, up from £28.5m and 17.7p in FY2017.
|ON THE BEACH (OTB)|
|ORD PRICE:||530p||MARKET VALUE:||£691m|
|TOUCH:||528-531p||12-MONTH HIGH:||650p||LOW: 350p|
|DIVIDEND YIELD:||0.4%||PE RATIO:||52|
|NET ASSET VALUE:||79p*||NET DEBT:||11%|
|Half-year to 31 Mar||Turnover (£m)||Pre-tax profit (£m)||Earnings per share (p)||Dividend per share (p)|
|*Includes intangible assets of £70.8m, or 54p a share|
The impact from the Monarch collapse caused On The Beach to miss analyst forecasts, sending the shares down on results day. But we’re optimistic that this is a short-term issue that should resolve itself by next winter. On The Beach has historically traded at a significant premium to peers on a price-to-book basis; if it reverts to its historic premium, there's implied 17 per cent upside from the current share price. Buy on the dip.
Last IC View: Buy, 401p, 14 Feb 2018