Mantra Group a buy
12/01/16 closing share price: $4.520
52 week high: $5.260
Most recent dividend: 5c Annual dividend yield: 2.21% Franking: 100%
Mantra is an Australian-based resort marketer and operator with operations in Australia, New Zealand and Bali. We have issued a buy on this stock as a way to take advantage of what we predict to be a boom time for Australian tourism. Leisure arrivals to Australia have risen by 5.9% in the year to October 2015. We see this trend continuing despite recent market turmoil.
The weakening of the $A is the main catalyst for this increase in tourism. Chinese visitors have grown year after year and we see this trend continuing. Although recent economic worries emanating from China are certainly of concern, the fact that the devaluation of the yuan/renminbi has been at a lower rate than the fall of the $A means that Chinese visitors to Australia are enjoying purchasing power not seen since 2009. The same is true of the purchasing power of British and American travellers.
We see pressure on European tourism as terrorism concerns are at all-time highs and images of mass movement of refugees across the continent are putting many people off travelling to the Continent. This is likely to see Australia and New Zealand being seen as a safer and more desirable alternative and should mean an increase in both international and domestic leisure travellers.
December saw Mantra Group up as much as 14% in a ferocious end-of-year rally. It has now given back all of these gains and was sitting at $4.52 at the time of writing, which is a previous support level as well as the 50-day moving average. This is a good level to start accumulating. Due to the recent market volatility, a conservative trader should stagger their buying, with the next level being at 4.20. We see this stock up significantly from current levels by year's end.
Conviction call Buy Target share price $5.50 Time frame 12 months