Corporate Travel Management
About the author:
- Author name:
- By Belinda Moore
- Job title:
- Senior Analyst
- Date posted:
- 27 February 2017, 8:22 AM
- Sectors Covered:
- Agriculture, Food & Beverage, Travel and Chemicals
Key points
- Corporate Travel Management's (CTD) 1H17 result exceeded expectations and they have increased FY17 EBITDA guidance again.
- In our view, CTD is a company in control of its own destiny, demonstrating that it can outperform no matter the state of the economy, the movement in ticket prices or FX.
- Given the strength of 1H17, full year guidance could prove conservative. Record client wins and recent acquisitions should also underpin a strong year in FY18.
Stronger than expected 1H17 result – NPAT rises 50%
Despite lower ticket prices, adverse FX (reduced EBITDA by A$2m) and a tough global economy, CTD's 1H17 result beat our forecast by 7%. Underlying EBITDA (+45% growth on the previous corresponding period) was stronger than expected, with 29% of underlying EBITDA growth by organic means. 1H17 benefited from record new client wins in all regions due to CTD's superior technology offering, strong customer service and ROI focus.
CTD also benefited from the US acquisitions of Montrose Travel (acquired 1 Jan 2016) and Travizon Travel (acquired 1 July 2016). The US performance was the highlight of the result with EBITDA up 254% on the previous corresponding period. This region is now the largest profit contributor to the group. Cashflow conversion was strong at 135%. Pleasingly, the interim divided beat our forecast at 12cps fully franked.
FY17 guidance is upgraded and could prove to be conservative
CTD said that it is trading at the top end of its previous FY17 underlying EBITDA guidance of A$97m (previously A$92-A$97m). Following the result, we have made only minor 1% upgrades to our forecasts given we upgraded our forecasts recently. In FY17 we forecast EBITDA of A$98.0m, up 42% on the previous corresponding period.
Following the recent equity raising, CTD has excess funds to take advantage of other acquisition opportunities which may arise. We forecast CTD to end FY17 with a net cash position of A$19.4m, rising to A$30.2m in FY18. We understand the company currently has a pipeline of opportunities, and any additional acquisitions would add further upside to our forecasts. Note that FY18 is the first full year to include the recent Redfern Travel and Andrew Jones Travel acquisitions.
With record levels of client wins in all regions, and signs that the previously underperforming mining and mining services sectors are now through the worst of it, CTD is seeing good momentum into FY18.
Investment view – CTD remains a high conviction stock pick
Based on our FY18 forecast, CTD is trading on its lowest PE multiple in some time at 21.1x (pre-amortisation). The PEG multiple is only 0.7x. Corporate Travel Management is a high quality growth company and we maintain our Add recommendation.
More information
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Disclaimer(s): Analyst owns shares.
Morgans Corporate Limited was Lead Manager and Underwriter to the rights issue for Corporate Travel Management Limited and may have received fees in this regard.
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