2009 Media Releases

June 29, 2009

Deutsche Bank initiates coverage of Flight Centre Limited

Deutsche Bank has initiated coverage of travel company Flight Centre Limited (ASX:FLT) with a Buy recommendation.

Research analyst Philip Pepe initiated coverage with an A$10.00 twelve month price target.

Mr Pepe said “Flight Centre’s Australian and UK divisions had experienced strong growth until 2009, which has proven to be a turbulent year. The global financial crisis has impacted the demand for travel agency services in both the leisure and corporate markets. The fall in Total Transaction Value (TTV) combined with the operating leverage in the business saw the profitability of these divisions reduce materially in FY09.”

Despite this, Mr Pepe believes there is upside in the stock. “Our view is that TTV growth for the Australian and UK markets will be positive from 2010 onwards, however we assume a growth rate of around 5% pa compared to the long term average of around 15-20% pa. The return to growth should see a gradual improvement in segment margins going forward, although we assume margins remain below the levels achieved in FY08,” said Mr Pepe.

Deutsche Bank research uses the discounted cash flow approach as its primary valuation method on this stock as it is the most suitable way to capture the cyclicality inherent in Flight Centre’s business model.

“Flight Centre currently trades at a material discount to our 12 month price target. Accordingly we initiate coverage with a Buy rating given the upside potential relative to our target price,” concluded Mr Pepe.

For further information, please contact:

Michelle Chaperon (02) 8258 1311



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