2011 Media Releases

October 10, 2011

Deutsche Bank initiates coverage of Jetset Travelworld

Deutsche Bank (XETRA: DBKGn.DE / NYSE: DB) has initiated coverage of travel agency group Jetset Travelworld (ASX: JET) with a Hold recommendation.

Research analyst Raymond Gonzalez said, “Despite the implied upside from Jetset’s current share price to our price target (+25%), we believe the stock should continue to trade at a discount to the ex-100 industrial index until liquidity increases. 

“We estimate Jetset’s current free float at less than ten per cent, which is unusually low. Low liquidity aside, we believe Jetset offers compelling value as a beneficiary of growth in the number of Australian international passenger departures”.

International departures are a key driver of Jetset’s retail divisional earnings and account for about 74% of the company’s EBITDAI. While Deutsche Bank analysts expect the rate of international passenger growth to decline due to slow due to economic uncertainty, they still expect growth of around five per cent. 

Jetset merged with travel and hospitality company Stella Group in 2011 making it the second largest travel group in Australia. Gonzalez believes there would be significant upside if Jetset can extract benefits of greater buying power and distribution reach from the merger which would further aid operating costs in 2012. 

In addition, Gonzalez said “We do not expect online competitors to have a material impact to Jetset’s three to five year earnings outlook as our research suggests there is not a material price difference between the products offered online and those offered by traditional travel agents. In Australia, we believe this is a function of Jetset and competitor Flight Centre being vertically integrated, therefore large enough to command competitive prices from product providers.”

Downside risks to earnings estimates and valuation include airline discounting, integration risks, a drop in international travel growth and deteriorating domestic economic conditions.

Deutsche Bank analysts believe there is potential for Jetset to re-rate higher over the medium term as share register liquidity improves and the benefits of the merged entity become more evident, which have the potential to drive earnings forecast higher than expected.

Jetset Travelword operates a vertically integrated, franchise based, travel agency business offering retail travel services, wholesale packaging, corporate travel management and ticketing services.

For further information, please contact:

Deutsche Bank AG    
Name : Amy King   
Phone: +61 (0) 2 8258 2505
E-mail: amy.king@db.com

 



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