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by John Woolfitt, Atlantic Capital Markets
Time To Go Back To The Beach In Spite of Covid-19?
Fundamentals & Statement Summary
With over 20% share of online sales in the short haul beach holiday market, On The Beach (LON: OTB) are one of the UK’s largest online beach holiday retailers. The group’s long-term mission to become Europe’s leading online retailer of beach holidays is fuelled by significant opportunities for growth on the back of innovative technology, low-cost base and a strong customer-value proposition.
On Tuesday June 30th, OTB announced interim results for the 6 months to March 31st, and said that prior to the escalation of COVID-19 in Europe, it had been trading well. In the first four months of FY20 and following the collapse of the Thomas Cook Group, OTB priced its offerings competitively, and saw total holiday sales grew by 29% for Summer 2020 departures. H1 revenue of £21.4m was down 66% on prior year due to COVID-19 related cancellations, with adjusted PBT down £13.4m to £2.3m due to a significant reduction in demand from mid-February when COVID-19 began to spread to Europe. Net debt of £13m excludes £68.8m of customer monies held in a ring-fenced trust account, and following a successful share placing on 22 May 2020, the group cash position was £50.5m, plus a £75m RCF facility which, at 31 May 2020, remained undrawn.
CEO Simon Cooper commented on the excellent progress in the first four months of the financial year, with the Thomas Cook collapse “driving record levels of brand awareness and achieving sales growth of almost 30% for holidays departing in Summer 2020.“
He added “The onset of the COVID-19 pandemic led to a rapid slowdown in demand for foreign travel followed by the total closure of airspace across Europe by mid-March. Our staff responded brilliantly to ensure that the Group delivered the highest possible customer service standards in the most difficult of circumstances”….”The flexibility and asset light nature of our business model together with our recently strengthened balance sheet and the actions we have taken since the middle of March means we are well placed to capitalise on the inevitable structural changes in the market post COVID-19. As a result, the Board continues to look to the future with confidence.”
Chart and Technicals
Source: FactSet and Hargreaves Lansdown
The inevitable ‘Covid cliff fall’ that characterises the charts of many stocks at present started at the end of February 2020, with the group losing 66% of its value during the following 25 or so days. A strong recovery during March saw OTB shares regain the 50-day moving average, currently at 290p, which it has held onto since April 16th. Provided the stock continues to hold the 50-day moving average, there is every reason to expect OTB shares to regain the benchmark 200-day moving average (purple indicator), currently at 358p, by the end of July 2020.
Summary and Atlantic View
While some may view OTB as a contrarian trade, our dealing team are attracted to OTB’s resilient performance before and during the COVID-19 crisis. The group responded strongly and took full advantage of the Thomas Cook collapse, leading to 30% growth in summer holiday sales pre-Covid, largely due to its innovative business model and low cost base. Added to this OTB have a strong cash position, boosted by strong shareholder support for the May 2020 placing. In summary, Atlantic Capital Markets are backing a long trade position on OTB, governed very much by the technical picture (358p initial target), and while the uncertain backdrop warrants running a tight stop loss, we are of the view that OTB is better placed than its peers to grow market share as the world starts to move again. In this case, it is time to go back to the beach!
To take advantage of this trading idea, speak to a member of our dealing team on 01872 229000 or visit the Atlantic Capital Markets website here
Reiterate Buy On The Beach (OTB) says VectorVest – Fundamental and technical position continues to improve
On The Beach Group (OTB.L) is an online retailer of short-haul beach holidays. The company markets the On the Beach brand to the UK, and the International segment, which includes Sweden activity through Swedish Website (eBeach.se). It offers packaged holidays with options to book single element products, such as flights or hotels. Its technology platform enables customers to package the constituent components of their holiday, including flights and hotels, and transfers to customize holidays from flight and hotel combinations.
Its search facility connects customers to suppliers of travel products. Each travel product is booked separately. The Company is independent from airlines and hotels, so that it offers customers a range of flight and hotel products bookable through online channels, including desktop, mobiles, tablets, and applications and over the phone.
On The Beach Group (OTB.L) was mentioned favourably here on December 13th. Link here to view that article. Although the share hasn’t seen the high percentage moves of a Sopheon or a Victoria both the technical and the fundamental position have improved. The chart is shown below, the share is undervalued and growing earnings strongly.
Since December 13th OTB has pulled back and kissed the high made in August 2016 and is now pushing northwards at the 2017 high. The 52 week high is at 300 and above this level OTB can break strongly towards 400p which is the VectorVest valuation.
Although OTB hasn’t done much since the initial blog entry, the technical and fundamental position has improved and the shares look bound much higher.
OTB should be considered by aggressive investors only as the relative safety (RS) of both below 1 on a scale between 0 and 2. Risk management is important in all financial trading but is especially important in low RS counters.
February 28th 2017
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The share price of On The Beach (OTB) may have got a bit ahead of itself, as shown by the morning’s fall of 15p (5%) on news that UK revenue has only grown by 26% in the 4 months to 31st January and the company reports strong growth in both bookings and revenue.
At yesterdays closing price of 305p the shares had nearly doubled since 7th December when they stood at 166p.
OTB claims to be the UK’s leading online retailer for beach holidays. Its target is the disruption of the established operators by having a low cost base, innovative, flexible online technology and a strong customer proposition. Growth is led by the company’s investment in technology and in online and offline marketing, investment which enables it be fleet of foot and beat its more sclerotic competitors by reacting rapidly and successfully to changes in demand, such as the recent huge shift from the eastern Mediterranean and Egypt to the safer shores of the western Mediterranean.
OBT has come a long way from its start up in a terraced house in Macclesfield in 2004 to its 2015 listing on Aim.
Preliminary results for the year to the end of September showed group revenue up by 37% to £63m., adjusted underlying profit before tax up by 46.5% and EBITDA by 44.9%.
Interim results for the 6 months to the end of March are due on the 19th May.