If you are looking for outsized returns for your investment portfolio, then it could be worth considering Flight Centre Travel Group Ltd (ASX: FLT) shares.
That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which believe the travel agent could be good value.
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What is the broker saying?
Macquarie was pleased with news that Flight Centre has agreed to acquire Iglu for 100 million British pounds (GBP). It is the UK's leading online cruise agency, which commands ~15% of UK cruise bookings and upwards of 75% of online bookings.
The broker highlights that the deal opens up its addressable market materially. And given its strong balance sheet, it feels that there's potential for further acquisitions in the industry. Macquarie said:
FLT to acquire Iglu for GBP100m upfront with earn outs up to GBP27m, that equates to 7.25x FY26e EBITDA (inc. synergies). Iglu is forecast to deliver pro forma FY26 TTV ~GBP450m & adj. EBITDA GBP14.8m. Iglu is the market leader in UK cruise, the world's 3rd largest market. There is a strong cultural fit between the businesses, a critical component of FLT's acquisitions. Iglu's current CEO, David Gooch, will continue to lead the business post acquisition.
Significantly expands FLT footprint in cruise with scope for more M&A. After acquiring Iglu, FLT's cruise related TTV will almost double to surpass $2b during FY26 with a stretch target of $3b TTV in FY28. Iglu adds an online cruise platform to its leisure portfolio that includes Flight Centre, Scott Dunn and Cruise Club UK, which should generate >$1.5b TTV during FY26, reducing leisure's strong weighting to the Southern Hemisphere.
Macquarie highlights that the cruise market is an attractive one, with strong growth and margins. It said:
Cruise is an attractive market with strong growth & higher margins. Both FLT's and Iglu's cruise businesses are seeing sales grow at 15-20% yoy underpinned by a resilient customer base and supply chain that is investing heavily in new ships and partnerships. The margin profile of cruise is also attractive, with Iglu's 3.1% FY25 EBITDA margin ~40% higher than the 2.2% in FLT's leisure division.
Time to buy Flight Centre shares
According to the note, the broker has retained its outperform rating with an improved price target of $17.85.
Based on its current share price of $15.04, this implies potential upside of 19% for investors over the next 12 months.
And with the broker expecting a 2.9% dividend yield in FY 2026, this boosts the total potential return to almost 22%.
Commenting on its outperform recommendation, Macquarie said:
FLT is well on track to deliver FY26 guidance, with solid TTV growth across both segments. Corporate is seeing the early benefits from Prod Ops initiatives with strong TTV growth on lower FTEs. Valuation attractive, and we see material upside to the current share price over a 12m view.
