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(ASX: CTD) | CORPORATE TRAVEL MANAGEMENT LIMITED

Feb 21, 2024

Sentiment: Sideways

Type of Trade: Conservative, High Growth, Dividend | Defensive

Industry: Travel

Analysis as per 1H FY24

Corporate Travel Management (ASX: CTD) is a travel management company that provides travel solutions for corporate clients. The company offers a range of services, such as travel planning, bookings, and management of travel expenses. Corporate Travel Management operates in over 70 countries and has offices across the globe, including in Australia, the Americas, Asia, Europe, and the Middle East.

The company’s clients include both large and small businesses, government agencies, and educational institutions. Corporate Travel Management uses technology and automation to provide its clients with cost-effective and efficient travel solutions.

In recent years, Corporate Travel Management has experienced significant growth, with its revenue increasing each year. The company has also expanded through acquisitions, which has helped it to enter new markets and expand its service offerings. Overall, Corporate Travel Management is considered a leading player in the corporate travel management industry.

Corporate Travel Management has expanded its global reach through a series of strategic acquisitions. The company’s subsidiaries include Chambers Travel Group, Diplomat Travel, and Lotus Travel Group. These acquisitions have helped Corporate Travel Management to enter new markets and expand its product offerings, positioning the company as a major player in the corporate travel management industry.

In FY23 Report

✅ Revenue Growth of 70% YoY to $660.1m

Generating fast growing PBT and NPAT up 367%, up to $92.5m.

✅ Excellent management, arguably better than its peers, as the company invested in people to ensure service excellence, to stay ahead of recovery with experienced and trusted leadership team – 30 years+ travel experience, across MD, global COO, all regional CEO’s.

✅ No debt, cash balance of $151m in 30 June 2023.

✅ 22c declared dividend.

✅ EBITDA group showing remarkable grow YoY with Record growth of 179% YoY to $167.1m

✅ Solid growth in all key markets in FY23 with Europe expecting another strong year of growth in FY24, ANZ modest growth, and Asia with record profit in FY24.

FY231H FY24 (comparative result)

🚩 Slower than expected growth mostly as result of 2Q Macro event as following:

  • Travel sentiment relating to conflict in the Middle East.
  • Most client annual travel budgets are fully utilised by 1Q24, due to unsustainably high-ticket prices.

CTM expects 2HFY24 to have substantial growth in comparison to 1H.

✅ The company is also investing in AI (Artificial Intelligence and Robotic Process Automation (RPA) with focus in CTM AI:

Agents:

  • Designed to specifically assist CTM agents to increase efficiency
  • Freeing up staff for highly complex, high-value transactions and urgent client issues

Clients:

  • Enabling seamless interactive experience for customers (chat, voice, email)
  • Providing superior self-service capability at any time of the day.

✅ Very Positive Outlook for FY24 due the strong momentum and significant new clients transacting, activity recovery of existing clients.

Guidance for FY24

✅ Growth in Revenue in between 17%-29%

✅ EBITDA growth of 44%-68%

✅ PBTa growth of 55%-87%

As per the most recent 1H FY24 Report

✅ 1H performance: The client achieved above-industry growth, translating revenue into robust profit growth successfully.

✅ Internal expectations exceeded: The 1H performance surpassed internal projections, with a 1/3 EBITDA skew to 1H or $87 million.

✅ Capital strategy implemented: A share buy-back program commenced in November 2023, allowing for the repurchase of a maximum of 6 million shares within 12 months.

✅ Strong financial position: The balance sheet demonstrates strength, with no debt and $131.3 million in cash. Cash conversion aligns with historical long-term trends.

✅ Interim dividend declared: A dividend of 17 cents per share, unfranked, was declared, reflecting confidence in future prospects and financial stability.

🚩 Although the company grew substantially in relation to the last financial year, the company claims that earnings growth lags behind expectations due to the 2Q macro:

  • Travel sentiment relating to conflict in the Middle East.
  • Most client annual travel budgets are fully utilised by 1Q24, due to unsustainably high-ticket prices.

Nevertheless, CTM 2Q macro impact is consistent with December quarter US airline operating profit vs p.c.p.; Delta -10%, United -27.5%, American -52.5% vs CTM +10%.

ANZ Business is still lagging behind due to the 2Q Sentiment Impact and carrying costs to support both legacy WoAG systems until the new government framework commences in February.

The Five-Year Strategy – double FY24 profit in 5 years is still expected to be accomplished by the company via CTM key supporting projects.

✅ Dividend was increased by 183% from 6c to 17c (unfranked), still 50% NPAT policy.

✅ $100m Share buy-backs commenced late Nov 2023, continues to Nov 2024.

Technical Analysis

Despite Corporate Travel Management’s (ASX: CTD) commendable performance relative to other travel stocks such as (ASX: FLT) and (ASX: WEB), investors who purchased CTD stock as an investment 52 weeks ago find themselves down by 8% today. This trend persists despite many analysts suggesting it as a buying opportunity for CTM post FY23.

Once again, this situation underscores the importance of employing an effective strategy to purchase stocks at technically discounted prices and to avoid succumbing to FOMO (Fear of Missing Out), even when a company exhibits impressive year-over-year growth.

It’s worth noting that the stock not only presents one but three opportunities for savvy traders utilising the BGS 20 Strategy or another effective strategy to profit from purchasing at technically discounted prices.

Encouragingly, the stock is currently trading at a technically discounted price once more, hovering around a hypothetical support level of approximately $16.

(ASX: CTD) is a stock that we have been trading with our VIP Member.

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