Question: What is your view of adding Flight Centre (FLT) to a superannuation portfolio?
Answer (By Paul Rickard): I’m not sure whether I have a good handle on Flight Centre. I added it to the Switzer Growth Portfolio at the start of the year, and then dumped it following an earnings downgrade and oversupply in the international air market. It has bounced back a little since then.
The major brokers are also a bit mixed. According to FNArena, sentiment is neutral at 0.0 (scale -1.0 is most negative, +1.0 is most positive). The consensus target price is $36.04, a premium of about 8.7% to the current price. Multiples are not too demanding (assuming that their core business is not impacted by online travel bookings) – 13.4 times FY 17 earnings, 13.0 times forecast FY18 earnings. The forecast dividend yield is 4.6% in FY17, and 4.8% in FY18.
Question: I was wondering whether RIO shares are worth selling now since it made a profit of $2.00 a share now since holding on nearly a year.
Answer (By Paul Rickard): The reasons you might sell RIO could include:
- a) you have better investment opportunities or need the cash; or
- b) you think the iron ore price is going to pull back; or
- c) management is doing a bad job.
I can’t comment on the former.
I don’t think the latter is the case, and on the price of iron ore, my sense is that the market has built a bit of a base around US$50 per tonne and we may have seen a bottom.
As for the brokers, according to FN Arena, consensus target price is $55.59. Sentiment is marginally positive at +0.4 (scale -1.0 is most negative to +1.0 is most positive)
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