In Brief: Flight Centre, Audinate & Atturra

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This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies.
For more info SHARE ANALYSIS: FLT
The company is included in ASX200, ASX300 and ALL-ORDS

This week's In Brief looks at three interesting companies with re-rating potential as restructuring, acquisitions align for a better growth outlook.

• Flight Centre highlighted for major re-rating potential with a more capital light business model
• Audinate is leveraging and growing its camera software offering via the Iris acquisition 
• Major contracts and AI tailwinds set Atturra up for growth

By Danielle Ecuyer

This week’s quote comes from Citi:

“We believe a tight labour market, new (higher) inflation forecasts, strong housing and household consumption all point to monetary policy being too accommodative. 

“Therefore, we shift our no policy change view to 50bps worth of rate hikes in 2026, starting as early as February, followed by May. 

“Q425 trimmed-mean inflation is likely to be 0.9% with a risk of 1.0%. Our terminal view for 2026 is now 4.10%.”

Jarden points to several reasons to be upbeat on Flight Centre

Come fly with me, come fly, let’s fly away… or so the song goes.

For Flight Centre Travel Group ((FLT)), the wheels of improvement are continuing to grind with Jarden pointing to “clear skies ahead” as the more optimistic scenario for the travel group becomes clearer for FY26.

Latest data from the Airline Reporting Centre in October show market growth while consensus expectations remain subdued, leaving scope for the stock to re-rate.

Flight Centre is the largest omni-channel operator globally and, with improved execution and emerging as an increasingly asset light business, the group has been consolidating its position and growing market share, the analyst highlights.

The recently announced acquisition of the UK’s leading online cruise agency Iglu strengthens its position.

Jarden envisages three potential positives from the acquisition: the ability to cross-sell and expand the offering to its existing customer base, with Iglu possessing over 15% of UK cruise booking share; the addition of new brands to the platform and leveraging Iglu’s partner base as well as expanding the cruise business into markets like the US with the Iglu brand.

Adjusting for the acquisition, the analyst raises net profit after tax forecasts by around 2%-3% for FY26-FY28, including a slight lowering of leisure estimates due to outperformance of lower margin routes such as Australian to Japan.

On balance, 2H26 is expected to deliver positive tailwinds for the group via cycling Asia ticketing issues, Liberation Day and Middle East conflicts, all of which, a year earlier, impacted high margin routes and override opportunities (when Flight Centre exceeds agreed sales thresholds).

The changing nature of the business to a more capital light business model offers margin upside alongside the potential further recovery of total travel volumes ((TTV)) in leisure.

The analyst puts a profit before tax margin of 2% for FY30 as a possibility against the current forecast of 1.7%. The ability to achieve such an improvement, which is not discounted in the current share price, could pave the way for a re-rating over time and an implied valuation of around $29 per share, with the caveat it would require patience and time to deliver.

Market waits for Iris integration to deliver revenue contribution to Audinate

Moelis is upbeat on Audinate Group’s ((AD8)) latest acquisition, Iris Studio, a cloud-based control platform for pan-tilt-zoom cameras, which brings forth capabilities for Audinate to speed up its video strategy by concentrating on device control rather than networking protocols.

The Iris software facilitates remote control of cameras via the cloud, with users allowed to access Iris Studios via a subscription model. The studio provides AI-driven production, including automated switching, framing and shot selection.

Strategically, Audinate has been concentrating on Dante’s AVoIP (audio video over internet protocol) networking solution. The second phase is to provide subscription-based management and control tools to generate recurring revenues.

The Iris strategy aligns with the second aim for Audinate, but the integration of Dante remains an ongoing “work-in-progress”, the analyst highlights.

No contribution from Iris has been added to Jarden’s revenue forecasts, but R&D assumptions incorporate a portion into Iris, which aligns with management’s FY25 earnings commentary.

The market has downgraded the stock price since August due to the higher expected operating costs associated with Iris, with scant knowledge around revenue contribution.

Iris’ launch is expected to offer better transparency on the acquisition and integration, which Moelis hopes will provide a more even-handed interpretation of Audinate’s outlook.

Buy rating retained with a $9.43 target price.

Atturra in the slipstream of AI adoptions 

Canaccord Genuity initiated coverage of Atturra (ATA), described as a leading advisory and IT solutions provider providing end-to-end technology services to enterprise, government and mid-market clients in A&NZ and North America.

The company partners with Microsoft, Boomi, SAP, OpenText, Infor and QAD within a serviceable addressable market of around $42bn and a large exposure to government ICT (Information and Communications Technology) budgets ($25bn) and Defence ICT spending ($6bn).

The suite of technology solutions offered includes Advisory & Consulting at around 15% exposure as a strategic technology advisory, with digital transformation roadmaps, cybersecurity and management consulting; all are high margin services to C-level management.

Business applications, at around 10%, include implementation, customisation and support of enterprise resource planning, content and business process management.

Data & Integration, at circa 15%, includes middleware modernisation, cloud integration platforms, data warehousing and business intelligence, to name some of the services.

Cloud Services, at around 10%, incorporates migration strategy and execution and hybrid cloud architecture using five primary data centres in NZ and co-location in Australia (NextDC ((NXT)), Equinix and Global Switch).

Managed services, at around 50%, is the highest growth segment and includes IT operations, network management and much more.

Atturra has over 1,500 client organisations including large Australian banks, as well as major Defence and Federal Government departments, the major miners, multiple state governments and over 40 councils. The largest customers have an average tenure of over eight years with revenue retention rates of over 99%.

The company has grown via M&A, with 14 acquisitions since listing in December 2021, of which seven were during and after FY25. Management is aiming to achieve 20%-plus total revenue growth annually over time via a combination of organic growth (50%) and acquired growth (50%), achieved via a cash balance of $92m with access to a $35m undrawn debt facility.

Canaccord estimates around an 18% earnings (EBIT) return on investment has been achieved.

Over the last four years, Atturra has recorded a revenue CAGR of 32%-plus and free cash flow over $9m in FY25.

Structurally, positive tailwinds from rising AI capabilities and adoption should assist the company. Management has achieved good exposure and positioning to gain momentum via its robust public sector relationships.

Buy rated with a $1.15 target price.

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