Corporate Travel Management Ltd flags profit beat, Hong Kong acquisition

Corporate Travel Management Ltd (ASX:CTD) has timed another capital raising with the shares near a record high.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

It might not generate half as many news headlines as stocks like the The a2 Milk Company (ASX: A2M) or Domino's Pizza Ltd (ASX: DMP), but Corporate Travel Management Ltd (ASX: CTD) has still managed to produce similar or superior returns for shareholders over the last few years.

It's growth is thanks partly to a history of acquiring smaller travel businesses to integrate into the Corporate Travel model and help provide the scale required to be able to offer the best deals to their corporate customers.

While acquisitions have also played a part much of the growth has also been organic as the strong company culture and alignment of employees' interests contributes to new client wins and business development across ANZ, Asia, Europe and its U.S. operations.

This afternoon the group announced it is to deepen its attempt to getting leverage to the fast-growing Chinese corporate travel market with the acquisition of 75.1% of Hong Kong-based Lotus Travel for $50 million plus up to $6.6 million in conditional performance payments. The deal is priced at 10x Lotus's FY17 EBITDA and is expected to complete in October to contribute around $4 million in EBITDA to Corporate Travel in FY 2019.

The group is to raise $40 million to fund the deal by issuing 1.554 million new shares at $25.75 each, which is good timing given the stock has been setting new record highs recently on the back of improved sentiment and the falling Aussie dollar.

Moreover, the group also confirmed that it expects to meet or beat the top end of its prior guidance for full year EBITDA of $125 million in financial year 2018. In response to the news the stock is trading flat at $27.60 in late afternoon trade, which way it travels in over the short term is likely to depend on what kind of guidance the group provides at its full year results in August.

Over the long term it retains a bright outlook being founder led with an outstanding track record in growing by acquisition without recourse to too much debt.

The benefits of owning acquisitive founder led businesses like Corporate Travel ahead of others run by management teams with minimal stakes like BWX Ltd (ASX: BWX) should be glaringly apparent to investors as the founder-led businesses will focus on the long term, while others like BWX appear to be more interested in their own short-term financial incentives and well being.

The kicker is that Corporate Travel's valuations remains reasonable relative to its growth rates, especially when compared to the excessive valuations tags sported by more popular and fast-growing businesses like WiseTech and Altium Limited (ASX: ALU).

Motley Fool contributor Tom Richardson owns shares of A2 Milk, Altium, BWX Limited, and Corporate Travel Management Limited. You can find Tom on Twitter @tommyr345 The Motley Fool Australia owns shares of and has recommended BWX Limited and Corporate Travel Management Limited & Domino's Pizza. The Motley Fool Australia owns shares of A2 Milk, Altium, and WiseTech Global. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man looking at his laptop and thinking.
Share Market News

5 things to watch on the ASX 200 on Thursday

It looks likely to be a poor session for Aussie investors today.

Read more »

Three people in a corporate office pour over a tablet, ready to invest.
Broker Notes

Bell Potter just slapped a buy on this ASX 200 share offering a 30% return

Which stock is being tipped as a buy? Let's find out.

Read more »

a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.
Broker Notes

3 of the best ASX stocks to buy now with $2,500

These shares are highly rated by the team at Bell Potter.

Read more »

Man smiling on top of rocks with mountains in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors were in a nervous mood today.

Read more »

A man in suit and tie is smug about his suitcase bursting with cash.
Broker Notes

2 big-name ASX 200 shares brokers rate as top buys

Let's see which shares could be in the buy zone right now.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Block, Catalyst Metals, Coronado Global, and Pilbara Minerals shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Share Gainers

Why Beach Energy, Boss Energy, Cochlear, and Light & Wonder shares are pushing higher

These shares are having a good time on hump day. But why?

Read more »