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CTD Share Price Under the Spotlight; Is the Travel Sector Inching Towards Revival?

October 8, 2020 Headline News No Comments Email Email

Summary

  • As per Flight Centre, international travel is unlikely to fully recover until FY23 or FY24 in the absence of COVID-19 vaccine.
  • However, a resurgence in domestic travel and prospects of travel bubble with New Zealand and other pacific islands seem to be providing glimmers of hope for the travel sector’s revival.
  • Travel player, Corporate Travel Management (CTM) remains under the spotlight amid strong stock performance, takeover spree and robust financials.
  • CTM has recently announced its second takeover of 2020, which is likely to bolster its position as one of the prominent mid-market corporate travel managers across the world.
  • The shares of CTM have recovered by over 270 per cent since March 2020 crash, surpassing most of the travel companies listed on the ASX.
  • The execution of the trans-Tasman travel bubble and eventual development of coronavirus vaccine may strike a right balance in the travel sector over the coming days.

The year 2020 has witnessed the worst global recession and business slowdown in the face of the COVID-19 pandemic. Border closures, stringent social distancing norms and travel restrictions severely impacted the flourishing travel and tourism sector.

Travel player, Flight Centre Travel Group Limited (ASX:FLT), anticipated in its recently released annual report that international travel is unlikely to fully recover until FY23 or FY24 in the absence of COVID-19 vaccine.

While international travel revival appears far from reality, a resurgence in domestic travel and prospects of travel bubble with New Zealand and other pacific islands seem to be providing glimmers of hope for the sector’s revival.

Given the sectoral trends, Corporate Travel Management Limited (ASX:CTD) remains under the spotlight amid strong stock performance, takeover spree and robust financials. CTD share price stood at $17.30 by the close of the trading session on 1 October 2020.

Corporate Travel Management Declares its Second Takeover of 2020

Despite COVID-19-driven headwinds, the Australian travel company, Corporate Travel Management Limited (ASX:CTD) has recently announced its second takeover of 2020. After acquiring Corporate Travel Planners in January, the Company has lately signed a binding agreement to acquire a leading North American corporate travel business, Travel & Transport, Inc.

This $274.5 million acquisition deal is expected to bolster CTM’s position as bolster its position as one of the prominent mid-market corporate travel managers across the world. According to CTM, the deal materially improves its scale in the North American corporate travel market, adding a further US$2.5 billion of the total transaction value (TTV).

To fund the acquisition, the Company has recently raised $262 million via an institutional entitlement offer, as part of its $375 million capital raising. The retail entitlement offer (fully underwritten) to raise the rest $113m will open 6 October 2020.

The acquisition deal, which is expected to complete in late October 2020, reflects CTM’s intention to make the most of opportunities while rebounding from the COVID-19 crisis.

CTM’s Shares Up Over 275% Since March Dip

The shares of Corporate Travel Management have recovered by over 275 per cent since March 2020 crash, surpassing most of the travel companies listed on the ASX.

The exceptional recovery in CTM’s stock price seems to be driven by its resilient performance during COVID-19 pandemic, with its results holding up better than expected in FY20. CTM posted a full-year loss of just $6 million in FY20, which was substantially less than other ASX-listed travel players.

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Promising COVID-19 vaccine trial results, JobKeeper extension, growing domestic travel options and dedicated government support also gave CTM’s stock price a shot in the arm.

Moreover, the investor community cheered CTM’s acquisition and capital raising announcements, making it ASX 200’s top performer on 30 September 2020.

Outlook for the Australian Travel Sector

The Trans-Tasman travel bubble between Kiwi Land and Australia can sprout as a major breakthrough in getting the travel sector back to its pre-pandemic state. Speculations are rampant that the travel bubble between Australia and NZ is expected to be up and running by next month.

Australian PM, Mr Scott Morrison, has recently hinted that South Australia and New South Wales are expected to be the first states to open travel corridor with Kiwi Land. However, he also highlighted that it is more likely to be a one-way journey initially, with Kiwis flying throughout Tasman.

The ultimate development of the coronavirus vaccine is also anticipated to remove a key stumbling block in the travel industry’s road to recovery, enabling Australians to feel safe and secure while travelling again. However, one cannot neglect that COVID-19 vaccine still appears to be some months away.

Moreover, Singapore’s recent decision to allow travellers from Australia (excluding Victoria) travel to the country from next week is further expected to give a leg up to the travel sector’s revival.

With Australia intensifying economic recovery efforts to revive from a technical recession, the nation may strike a right balance over the coming days, unlocking doors of opportunities for the battered travel industry.

 

Source: Kalkine  Media

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