The shares of Flight Centre Travel Group Ltd (ASX: FLT) will be on watch today after the travel agent announced a strategic investment in emerging travel company Ignite Travel Group.
Flight Centre has acquired a 49% minority interest in the Gold Coast-based company which specialises in the development and distribution of innovative leisure market models including exclusively curated holiday packages, travel vouchers, and rewards programs.
No financial details have been given regarding the deal, other than that Flight Centre will fund its purchase through the use of its own cash reserves.
According to the release Ignite Travel is expected to deliver over $100 million of total transaction value during FY 2017 thanks to the solid growth of its three key business units in both the B2B and B2C markets.
Its My Holiday Centre unit specialises in handcrafted and value added luxury package holidays across 14 specific destinations and sectors. The Holiday Exclusives unit sells exclusive, limited time travel vouchers that represent extreme savings to consumers. Finally, the RewardsCorp unit deploys patented models to design and implement unique rewards and promotions programs for corporate clients to offer to their customers.
The investment is expected to fast-track Ignite's growth, while also providing Flight Centre's suppliers with new distribution opportunities and customers with new product options.
Although I wouldn't class this investment as a game-changer, I am pleased to see the company diversify its sales network. I believe this deal will increase its online footprint and go some way to helping it compete with its online travel agent rivals Webjet Limited (ASX: WEB) and Helloworld Ltd (ASX: HLO).
Whilst I wouldn't necessarily invest purely on the back of this deal, I would consider investing in Flight Centre because of its cheap price and strong fully franked dividend. At present its shares are changing hands at just under 14x full year earnings and providing a fully franked 4.2% dividend. That could well make it a bargain in my opinion.
