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Treasure Chest: Kelsian Group

Treasure Chest | Dec 03 2021

This story features KELSIAN GROUP LIMITED. For more info SHARE ANALYSIS: KLS

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea is Kelsian Group from Canaccord Genuity.

By Danielle Austin

Whose Idea Is It?

Analysts at Canaccord Genuity

The subject:

Public and tourism, land and marine transport provider Kelsian Group ((KLS)), formerly (and until fairly recently) known as SeaLink Travel Group.

Analysts at Canaccord Genuity suggest today's beaten-down share price offers 50% potential return over the year ahead, including circa 3% in dividend.

Since August, shares in Kelsian Group are in freefall. Having peaked at $10 -an all-time high- the shares have only fallen, and fallen further since with yesterday's closing share price at $6.38 marking a loss of circa -36%.

Last Friday the company announced it had not been successful in its bid for the Sydney Region 9 contract and Canaccord Genuity believes ongoing share price weakness reflects negative market perception of missed opportunity.

The broker likes that Kelsian has strong revenue visibility with more than 90% of revenue contracted as well as that the company has demonstrated ability to retain contracts. Canaccord Genuity has retained its Buy rating, while only lowering its target price to $9.62 from $9.94 as missing out on this contract was never incorporated into its modeling in the first place.

More info:

Despite Kelsian Group losing out on the Region 9 contract to a Transdev-John Holland joint venture, and missing out on a sizeable contract with the Melbourne Metro Bus Franchise in October, Canaccord Genuity notes considerable further opportunity for the company to set its sights on. As part of its growth strategy, the company has tendered for contracts around Australia and the UK, and the broker notes further bus tender opportunities in both Sydney and Singapore.

Kelsian is also considered well-positioned to benefit from opportunity in the organic resources transport segment, having already integrated the acquisition of mine site transfer charter company Go West.

In the short term, Canaccord Genuity expects the company’s marine and tourism segments to benefit from a prolonged peak summer period, and notes room for growth in the Frasier Island and north Queensland regions, as well as from acquisitional activity to add further scale. The broker considers opportunity in marine, tourism and resource transport to be potential catalysts.

At this point Macquarie is the only other broker to have commented on Kelsian Group’s Region 9 contract loss. Macquarie has maintained a Neutral rating and reduced its target price to $6.45 from $7.85, equally noting further tendering opportunities for the company over the next two years.

Of five other brokers who cover this company, four have a positive view with price targets suggesting a general consensus the share price weakness has become "excessive". Bell Potter rates the stock Hold with a price target of $9.00.

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