Key points
- Corporate Travel Management recently embarked on its global strategy and still has ample opportunity to grow through further acquisitions.
- It participates in the corporate travel segment only which is more resilient than the leisure segment.
- Platypus’s short-term target price for Corporate Travel Management is $14.50 (currently around $10.74). There’s upside risk to this valuation from potential further acquisitions.
Jelena Stevanović is a senior analyst at Platypus Asset Management.
How long have you held Corporate Travel Management?
We initiated our position in October 2014 as we started shifting our exposure to the global travel segment away from Flight Centre (FLT) to Corporate Travel Management (CTD) based on the view that a company exposed to the corporate travel segment only will have better growth opportunities than the one operating in both corporate and leisure segments.
Corporate Travel Management is a corporate travel management company with operations in Australia, New Zealand, North America, and Europe. The company was established in Brisbane in 1994 and since then has grown to 46 locations around the world through both acquired and organic growth.
Corporate Travel Management’s acquisition in New Zealand in 2010 marked the beginning of its offshore expansion strategy and the company’s global footprint grew very quickly after that. First by entering the US market in 2012 through the acquisition of R&A Travel, followed by their Asian acquisition in 2013, and a year later the acquisition of European based Chambers Travel.
What do you like about it?
Corporate Travel Management has only recently embarked on its global strategy and we believe the company still has ample opportunity to grow through further acquisitions in their current markets as well as by continuing to expand their global footprint. Both are expected to assist Corporate Travel Management in becoming more capable of servicing large clients with global travel needs.
Such clients have traditionally been serviced by large global providers like Amex and Carlson Wagonlit. Corporate Travel Management differentiates itself from its large competitors by providing travel solutions that are more flexible and through more personalised customer service.
We believe that Corporate Travel Management’s organic growth will be supported by market share wins from such large competitors.
In addition, Corporate Travel Management participates in the corporate travel segment only which we believe is more resilient than the leisure segment and competitors in this space. Unlike its leisure counterparts, it is not forced to compete on price alone.
How is it better than its competitors?
Corporate Travel Management differentiates itself from other global corporate travel management providers by offering a tailored travel solution for each client based on their specific needs, whilst still promising to deliver a percentage of their total spend back in cost savings.
What do you like about its management?
Corporate Travel Management was founded by Jamie Pherous who is still involved in the day-to-day management of the company in his role as the managing director. Jamie is also the largest shareholder with over 20% of Corporate Travel Management shares.
His enthusiasm and commitment to growing the business has not changed in the two decades of the company’s existence. The same passion for growing the business is evident throughout Corporate Travel Management’s executive and senior management team as the team is made up of corporate tourism veterans and, just like Jamie, executives who founded businesses that have merged with Corporate Travel Management.
What is your target price on Corporate Travel Management?
Our short-term target price for Corporate Travel Management is $14.50 based on our 12-month forward EPS estimate. There’s upside risk to our valuation from potential further acquisitions, which would result in a material upward revision of our EPS forecasts. We believe the stock can continue to trade in the 30 to 35 times 12-month forward PE range for the foreseeable future, as long as the corporate strategy and opportunities for further consolidation and growth remain intact.
At what point would you sell it?
We do not expect to sell Corporate Travel Management in the short-term as we believe the company is just starting its next phase of growth and as such will continue to deliver impressive earnings growth for the next few years.
How much has it added (subtracted) to your overall portfolio over the last 12 months?
Corporate Travel Management has contributed 15 basis points to our performance in the last nine months that we have owned it.
Is it a liquid stock?
Corporate Travel Management started its listed life with poor liquidity as Jamie Pherous, the founder and managing director, held a large portion of its shares. Jamie has not participated fully in the last few capital raisings in order to improve liquidity of the stock. We would argue the liquidity is reasonable with ~ $800m of free float.
Where do you see the value?
We believe Corporate Travel Management will continue to deliver value to shareholders through simply executing its strategy of continuing to grow the business through market share wins, further consolidation of the industry in their current geographies and expanding its global footprint. We believe that Corporate Travel Management has a passionate and committed management team that will continue to innovate and stay ahead of its competitors.
Corporate Travel Management (CTD)
Source: Yahoo!7 Finance, 2 July 2015
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