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Speaker 1: Welcome to Fear and Greed Summer Investing, the series brought

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Speaker 1: to you by Vanta specialists in compliance led to Growth.

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Speaker 1: I'm Sean Elmer. The travel sector has bounced back well

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Speaker 1: from the pummeling it took during the pandemic. Today we're

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Speaker 1: getting some tips on what to look for when investing

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Speaker 1: in travel and leisure. As always, this is general information

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Speaker 1: only and you should see independent advice before making investment decisions.

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Speaker 1: Brian Hand is the Director of Equities Research Australia in

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Speaker 1: New Zealand at Morning Star. Brian, Welcome back to Fear

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Speaker 1: and Greed.

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Speaker 2: Good to siezeon.

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Speaker 1: The travel and tourism sector had great recovery post COVID.

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Speaker 1: But where are we now as we enter twenty twenty

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Speaker 1: five for that sector?

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Speaker 2: Yeah, Suan, I think we're entering that stage where the

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Speaker 2: market is undecided and on a knife edge between number one, yes,

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Speaker 2: we still got the pre COVID levels to get up to,

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Speaker 2: but number two, we're having some pressures on the cost

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Speaker 2: of living on mortgage and all of those economic concerns,

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Speaker 2: and therefore should I be spending money on travel rather

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Speaker 2: than paying off my mortgage? So I think we're on

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Speaker 2: a knife edge in terms of what the outlook could

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Speaker 2: be in the need.

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Speaker 1: What surprises about travel companies? I mean, towards the end

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Speaker 1: of last year, there are certain stocks Quantits being an

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Speaker 1: obvious one doing really well, share price high or close

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Speaker 1: to highs. Then some of the other ones, some of

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Speaker 1: the more corporate ones, didn't seem to be doing so well.

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Speaker 1: What are some of those stocks you like and some

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Speaker 1: of you don't like in this sector?

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Speaker 2: One stock that we do like is flight Center. Now,

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Speaker 2: we like it because a lot of people equate them

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Speaker 2: to these branches everywhere and they will be susceptible to technology,

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Speaker 2: call this intermediation. But we think one aspect of flight

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Speaker 2: Center that people overlook is the fact that they are

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Speaker 2: very overexposed to the older demographics, the people who are

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Speaker 2: cash rich as a rich and they're not really susceptible

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Speaker 2: to these cost of living things and interest rates rises.

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Speaker 2: In fact, they like it when the interest rates rise

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Speaker 2: because that's good for their earnings and deposits. So I

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Speaker 2: don't think people are appreciating how much fly Center is

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Speaker 2: leveraged to that demographic and that gives them a certain

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Speaker 2: element of resilience to their earnings. And then Sewan you

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Speaker 2: mentioned that some of these corporate exposed businesses travel they're

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Speaker 2: not doing well, but if they do recover, fly Center

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Speaker 2: is also leveraged to that because half of the business

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Speaker 2: people don't know this, but half of the business is

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Speaker 2: leverage to that corporate travel spending.

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Speaker 1: What about Quantus?

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Speaker 2: I would be extremely careful on Quantus at these levels, Seawn.

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Speaker 2: I think I think one or two years later, people

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Speaker 2: will look back at this and say, what was I

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Speaker 2: thinking paying eight to nine dollars per share for Quantus

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Speaker 2: when I know that capital expenditure is going to go

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Speaker 2: up and we know that there will be more capacity

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Speaker 2: coming into this market. And so one of the things Shawn,

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Speaker 2: that that people need to be mindful of investing in

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Speaker 2: leisure stocks and travel stocks is that you don't want

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Speaker 2: to invest in stock a travel stock ahead of any

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Speaker 2: capital expenditure bump that's coming on, because when conditions turn,

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Speaker 2: you might have a good balance you it right now,

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Speaker 2: but when the conditions turn that good balance you it

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Speaker 2: can turn to gello very quickly. If you have a

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Speaker 2: big capital expenditure profile coming on.

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Speaker 1: And the quanet is we know they're going to have

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Speaker 1: to spend a lot of money on planes over the

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Speaker 1: next decade or so. Is that kind of the basis

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Speaker 1: of that.

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Speaker 2: I think so, Sean and I read Joe Aston's book

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Speaker 2: and if it was up to him, yeah, they'll probably

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Speaker 2: have to spend billions. So there does seem to be

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Speaker 2: a little bit of underinvestment that's been going on in quantus,

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Speaker 2: and sooner or later I think that will catch up.

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Speaker 1: Okay, what about other leisures stock not necessarily specifically travel.

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Speaker 1: What do you like or dislike other leigures.

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Speaker 2: The one that people are probably ignoring at the moment

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Speaker 2: is a travel company called web Travel Group that used

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Speaker 2: to be Webjet. Now they spun off webjet, the good

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Speaker 2: little website that you and I used to book travel.

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Speaker 2: Now they are purely one hunchred digital B to B hotel, beds,

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Speaker 2: accommodation provider. So it's got a really big growth runway

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Speaker 2: in terms of it participates in a global space that

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Speaker 2: is huge, and it is only a very miniscule player

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Speaker 2: in that growing market, so the runway is significant. It's

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Speaker 2: got no dead at all, plenty cash and right now

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Speaker 2: is suffering but from a bit of a sentiment slump

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Speaker 2: because two days after it emerged and made a big

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Speaker 2: profit warning. But I think if you can look over that,

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Speaker 2: I do believe that there is a lot of value

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Speaker 2: in that stock.

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Speaker 1: Do you think generally as a sector travel and tosroum

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Speaker 1: and leisure is a good area to be given the

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Speaker 1: economic cycle.

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Speaker 2: I'm more sure about whether it's a good area to be.

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Speaker 2: But one thing I can be sure of, Sean, is

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Speaker 2: that whenever you hear really unfortunate shocking news like terrorist attacks,

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Speaker 2: plane crashing, economic uncertainty, even a pandemic, I do believe

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Speaker 2: that your listeners should look at leisures as one of

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Speaker 2: the first sexerts to look at because whether you want

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Speaker 2: to use euphemism like you know, buying straw hats in

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Speaker 2: winter or buying it when there's blood on the street,

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Speaker 2: this is one sect that that really applies. You want

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Speaker 2: to buy it when everybody is completely averse to it

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Speaker 2: because of all the risks. Because once you pick a

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Speaker 2: company that's got good balance sheet, I do believe that

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Speaker 2: things will always turn around because people will always travel

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Speaker 2: and have a good time.

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Speaker 1: Brian, thanks for your time today.

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Speaker 2: Thank you, Sean.

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Speaker 1: That was Brian Hand, director of Equeri's Research Australia, New

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Speaker 1: Zealand at morning star. Remember to get your own independent

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Speaker 1: advice before making decisions. This is Fear and Greed Summer

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Speaker 1: Investing series, brought to you by Vanta. Vanta automates compliance

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Speaker 1: I'm Sean Elman. Enjoy your day