Shares in Helloworld Travel Ltd (ASX: HLO) are down almost 20% over the past 12 months, but according to the analysts at Morgans, now could be the time to buy.
The broker has upgraded its share price target for the company following a new deal to acquire Crown Currency Exchange (CCE) for $135 million.
Before we get to what the share price target is, let's look at that deal in more detail.
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Expansion potential from the new deal
Helloworld announced the deal earlier this week, saying it would buy out CCE, which operates 68 stores across Australia.
The company added:
It was acquired by the vendor in 2019 and has expanded its footprint across Australia under the management of Emily Palermo. Both Emily Palermo and Greg Woolley will be remaining with the business in their respective capacities as Chief Executive Officer and Chairman. The business employs over 200 people with the Head Office located in Hobart and outlets throughout Australia.
Helloworld's Managing Director, Andrew Burnes, said the acquisition would be highly complementary to Helloworld's retail agency businesses and would present multiple opportunities for expansion across the company's retail networks.
CCE generated EBITDA of $22 million in FY26.
The size of the acquisition is large relative to Helloworld's current market capitalisation of $229.2 million.
The deal will be funded by debt, equity, and a vendor loan facility.
Helloworld shares look cheap
Morgans said in its research note to clients that CCE was Australia's third-largest foreign exchange retailer behind Travelex and Flight Centre Travel Group Ltd's (ASX: FLT) Travel Money Oz.
The broker agreed that CCE was a good fit for Helloworld.
HLO's retail travel agency network sells roughly 2.4m airline tickets a year to outbound travellers, a natural tie-in for currency exchange. The agents will now have the ability to sell foreign currency alongside travel bookings. Synergies are expected mainly from rolling CCE outlets into HLO's existing agency network. CCE does not currently operate in New Zealand, unlike its peers, giving HLO a further expansion opportunity.
Morgans said Helloworld was currently paying a 7.3% fully franked dividend yield, and stated:
We think patient investors will be well rewarded when a travel industry rebound eventuates. With ANZ's largest agency network, HLO is well placed to leverage the structural tailwinds favouring leisure travel given its target market is becoming wealthier, living longer and travelling more. FY27 earnings guidance at the 23 October AGM is the next share price catalyst.
Morgans has increased its share price target for Helloworld from $2.18 to $2.24, against a current price of $1.37.
