Late last week, some expert fund managers fronted the famous Sohns Hearts & Minds conference, held this year in Adelaide. Eleven stock ideas were dangled in front of attending investors. Unfortunately for local investors, who don’t tend to invest in overseas stocks individually (instead preferring to use funds or ETFs for non-Aussie exposure), only two of the tips were listed on the S&P/ASX 200 index. One was Perpetual, recommended by Ellerston Capital’s Chris Kourtis, who (like yours truly) was a Resmed fan and got the chocolates with a 60% rise. The second one was Corporate Travel Management, which had a 10.38% jump last week.
This travel stock, favoured by Rikki Bannan from IFM Investors, has lost nearly 27.8% over the past year. This came as companies such as Flight Centre (FLT) and Webjet also copped it.
FLT is down only 9.36% over the past year but has dropped 19.84% over the past month. It rebounded last week by a tick over 6%.
Webjet has split its travel business from its hotel room operation, but the travel arm is off 30.98% over the year. That’s with a 5.63% lift last week as travel businesses attracted support. The new company WJL rose 14.84% last week, reinforcing a rethink on travel investments.
So, what do the analysts think about Perpetual (PPT) and Corporate Travel Management (CTD)? Here’s the table of price targets and potential gains from FNArena for PPT, with the average predicted gain being 8.9%.
Perpetual
Clearly, five out of five company watchers like the company, which is a financial institution. However, only Bell Potter is enthusiastic about the company, with an 18.75% rise tipped.
This is the Courtis view on PPT:
1. It has had bad leadership but that’s changed.
2. Poor capital allocation.
3. Woeful execution.
4. It’s in a demerger where it should sell its trust and wealth businesses to KKR.
5. That will give them a billion dollars.
6. The stock is trading at a big discount to its peers.
Bell Potter drew attention to this demerger and still sees the company valued at $24.76 compared to a current price of $20.85.
Personally, I’ve seen PPT as a dud performer but a billion dollars and a new CEO Bernard Reilly, who was appointed in September this year, might be a gamechanger.
Reilly was former head of the $300 billion industry super fund, Australian Retirement Trust. I’m sure Courtis ran his ruler over him and what his potential might be.
To CTD, and here’s what the analysts think of this travel company that services the business sector.
Corporate Travel Management
This is a less supportive table for CTD, though Shaw and Partners and Morgan Stanley see potential. The sector has been hurt by 13 rate rises and a slowing economy. The airline ticket prices could be curtailing business travel as well.
This is Banan’s positive take on the company:
1. The 30% share price tumble makes it attractive.
2. The company’s earnings outlook is better than the market is expecting.
Last year, Banan tipped a little company called Telix Pharmaceuticals. This is up 143.8% over the past 12 months!
Shaw and Partner’s analyst has a geographical take on the company, with FNArena’s reporter making the following point: “The broker highlights Europe represents under 20% of the company’s revenue and the UK government circa half that. North America and Australia & NZ are underpinning guided 10% growth in rest-of-the-world revenue growth for FY25.”
Morgan Stanley agreed with the above favourable analysis and threw that management refuted the fact that “lower airfares were a headwind to growth”.
Corporate Travel Management
The recent uplift in CTD’s share price is encouraging and we can see what this company can do when interest rates are lower and global economic growth is more helpful.
If you believe the past rate cuts globally and the ones expected in 2025 will stimulate business and travel, then CTD might be a rewarding play.
I suspect you’ll have to be patient and there could be a Trump trade curve ball that could reduce enthusiasm for travel stocks. But the patience is bound to be rewarded. This is a good company in a rough time for the sector.
(For tonight’s TV show, I’ll be asking Fairmont Equities’ Mike Gable to look at the charts for these two companies, along with PDN, BHP, NEU, JHX, 360 and MP1. Make sure you watch this!)
