Prepare for Take-off


Flight Centre and Domino’s Pizza. Two very different companies with two key factors in common. Both are Australian success stories, and both models exist to support our inherent laziness. Many people called the death of travel agencies as the internet boomed with online booking sights and customer friendly interfaces. Despite the doom and gloom speak Flight Centre (Unfortunately, we could not get stock quote ASX:FLT this time.) has taken off delivering massive yields and capital gains over the medium term.

Firstly on the dividends. There pretty impressive. Think skateboarding dog impressive. 5.97% and 5.23% in September and March this year, and 4.68 and 4.29% last year. So not only are they quite significant in contrast the remainder of the market, they have been getting bigger for the past 6 X 6 month reporting periods. The group have been listed on the ASX since 1997 and have recorded dividends every year since.

So with yearly returns you probably want to hear about the capital gain potential. Well calm down I am getting there. In June 2012 the group was priced at $18.596, since then the price has soared (or for a pun “taken off”). In June this year the price averaged out at $41.103, that is growth of 121% in the three year period. It looks to be following a long term growth trend with the occasional hiccup with the ASX index.

Right now is one of those hiccups. One might say they have hit turbulence. The stock finished the September quarter off at $36.10. This is a heavy discount (24%) from the earlier peak in May. As I have previously mentioned when the market crashes like it has recently, there are bargains a plenty. The returns here will be good in the short term and great over the longer period.

Disruption. That is what the haters are going to say, “UBER” & “airbnb”. I can hear them already. But a Blue Lake favourite here is Swifty, so I’m just going to shake it off. While booking stuff ourselves is becoming easier, as a society we are becoming lazier. The idea that we can ask someone else to book our travel is far easier than looking around ourselves. I would argue that Flight Centre as a business is the disruptor, and will continue to be present in the holiday booking process.

What increases my confidence of this business is firstly the breadth of the brands, 29 of them. And there is a focus on expanding overseas into the UK and USA. This offsets in part the currency risk (that people won’t travel due to the expense that the low Aussie dollar brings) but also presents some strong growth opportunities in the medium to long term.