Helloworld Ltd jumps on broker upgrade: Is it a buy?

The shares of Helloworld Ltd (ASX: HLO) jumped by around 4% this morning after Bell Potter released a research note revealing it has initiated coverage on the integrated travel business with a buy rating and a $4.01 price target.

The buy recommendation comes on the back of a recent announcement of a new two-year deal with Qantas Airways Limited (ASX: QAN). This deal is a continuation of Helloworld’s successful commercial arrangement with Qantas, but this time adds in the Jetstar brand to its flight sales for one year.

Both companies are optimistic on the deal, with Qantas CEO Alan Joyce believing that this deal allows Qantas to “commence a range of joint marketing and sales activities as well as investigate new commercial opportunities.”

Today’s gain means the share price is up by around 53% in the last three months thanks to a series of positive announcements. The big one being its announcement that total transaction value is expected to come in between $5.3 billion and $5.4 billion for the full year, compared to $4.7 billion a year previous.

The merger with AOT Group in November 2015 has clearly paid off for the company and its shareholders. As well as boosting total transaction value the company has recently reported that the original $7.6 million of synergies it expected from the merger is likely to be surpassed.

Management has now identified $13.2 million of synergies, with $5.8 million of them already realised at a cost of $1.2 million. In addition to this, cost savings equal to $3.9 million per year have also been identified and are currently being actioned.

Whilst this is all very promising for investors, I would still put an investment in rivals Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) ahead of Helloworld. Right now I feel Flight Centre shares have been sold of to such a level that they’re in bargain territory. I’m also attracted to Webjet’s strong growth prospects underpinned by the recent acquisition of Online Republic.

It is also worth me pointing out that Bell Potter is a major shareholder in the company following the purchase of CVC’s 12% stake last month. The 13.5 million shares worth $36 million, came at a price of $2.70 a share according to the Australian Financial Review. Food for thought.

Finally, as well as Flight Centre and Webjet I would highly recommend taking a look at these three blue chip shares. Each pays a solid dividend and could provide share price gains in the month ahead.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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