On The Beach Group (OTB.L) is an online retailer of short-haul beach holidays. The company markets the On the Beach brand to the UK, and the International segment, which includes Sweden activity through Swedish Website (eBeach.se). It offers packaged holidays with options to book single element products, such as flights or hotels. Its technology platform enables customers to package the constituent components of their holiday, including flights and hotels, and transfers to customize holidays from flight and hotel combinations. 
Its search facility connects customers to suppliers of travel products. Each travel product is booked separately. The Company is independent from airlines and hotels, so that it offers customers a range of flight and hotel products bookable through online channels, including desktop, mobiles, tablets, and applications and over the phone.
On December 6 2016, OTB published preliminary results for year to 30 Sept 2016. Group PBT increased by 776% to £16.9m (from a FY15 loss of £(2.5)m), on revenues 13% higher at £71.3m. At the end of the year net external cash rose to £26.1m (£10.9m), and a maiden final dividend of 2.2p per share was proposed. CEO Simon Copper said the results were “testament to the strength and flexibility of our agile business model amidst difficult conditions in the travel industry.” “Using our scale to drive exclusivity, our technology to drive innovation and our financial strength, ATOL protection and strong consumer brand to drive customer trust, we are well placed to capitalise on the structural changes in the market which will only accelerate given the difficult conditions in the market this year.”
The strong numbers in the results announcement simply confirmed the OTB investment opportunity, which had been picked up by VectorVest back in September after the share price had retraced from summer highs. The stock was flagged across a number of metrics, including Value, Relative Timing (RT), Growth to PE Ratio (GPE) and VST-Vector (VST) – the master indicator for ranking every stock in the VectorVest database. On value, a measure of a stock’s current worth, OTB is rated at 328.58p, well ahead of the current 263p.
The chart of OTB.L is shown above with the share price shown in candlestick format. The valuation is shown by the green line above the price and earnings per share (EPS)is charted by the blue line in the window below the price. The share is undervalued and growing EPS strongly and linearly. The share price has broken upwards through a major high (made in August 2016) and has pulled back and “kissed” this level which is marked as the horizontal blue line on the chart. With this resistance now in all probability becoming support the share is poised for further gains.
The Relative Safety of the share is less than 1 on the VectorVest program and this reflects and reinforces the risk associated with trading in small companies in their early stages of development. The opportunity is for those traders who have proven experience in managing risk.
Summary: OTB’s business model is uniquely placed to take advantage of the difficult conditions in the travel industry. The stock is also supported by a range of key VectorVest metrics outlined earlier in this blog, warranting a buy rating at current levels.
David Paul
December 14th 2016
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