Corporate Travel Management Limited

Strong Revenue Conversion to EBITDA: Corporate Travel Management Limited (ASX: CTD) is engaged in providing innovative and cost-effective travel management solutions to corporate management. The company offers end to end travel management solution including the purchase and delivery of travel services for its clients. The company in its latest investor presentation summarized its successful business outlook coupled with a long-term strategy and it is operating for 25 years. The company built a global corporate travel business ex Australia that is forecast to achieve TTV$6.5bn for FY19, representing under one percent of the total global corporate travel market. It has a strong track record of strategy and execution.

The company, in the recent past, has announced to pay a dividend of AUD 0.180 per share on April 12, 2019, on fully paid ordinary shares.The ex-date for the same was 7 March 2019 and the record date was 8 March 2019.


Comparative Statutory Profit & Loss (Source: Company Reports)
 
The TTV of the company increased by 31% on the prior corresponding period (pcp) to $2,951.5 million in 1H19 compared to $2,258.5 million in 1H18. The company did an excellent translation of revenue to EBITDA due to benefits of CTM's growing scale, technology and automation. The underlying EBITDA of the company went up by ~21% to $64.6 million in 1H19 compared to $53.5 million in the previous corresponding period, primarily on the back of strong organic growth and specifically record client wins.

Strategic initiatives: The company is tracking at the top end of FY19 guidance. The company is expected to post underlying EBITDA between AUD$144-150 million with a 15% to 20% growth as compared to FY18.It is expected to enhance shareholder value in mid to long term which will depend on key strategic initiatives such as Continued Organic Growth & Acquisition, continuous development of SMART technology suite globally & develop new tools for its clients, innovation, and continued investment to attract, retain and develop the brightest talent, etc.

On the price-performance front, the stock has done well as it generated a YTD return of 14.14% and a return of 11.98% over the past three months.

Considering the robust financial performance in 1HFY19 along with decent EBITDA guidance for FY19, we reiterate our “Hold” recommendation on the stock at a current market price of $25.360 (up 4.362% on 20 March 2019).
 

Webjet Limited

Dip in EBITDA Margin Due to Higher Marketing Spending: Webjet Limited (ASX: WEB) is a leader in an online travel agency, with its operations in Australia and New Zealand. The company has recently announced a dividend distribution of AUD 0.085 per share on ordinary fully paid shares of the company. The payment date is 18 April 2019 and the ex-date and record date was 20 March 2019 and 21 March 2019, respectively.

The company also recently announced that the voluntary escrow restrictions on 796,772 ordinary shares which were issued in part consideration for the acquisition of JAC Travel Group (Holdings) Limited, which was released on13 March 2019.

1HFY19 Operational Snapshot (Source: Company Reports)

The revenue went up by 12.0% to $74.1 million in 1HFY19 as compared to $66.3 million in the prior corresponding period.The EBITDA improved by 11.0% to $28.5 million in 1HFY19 as compared to $25.7 million in 1HFY18. However, the EBITDA margin is down by 36bps on prior corresponding period on the back of higher costs as these rose mostly from increased marketing spending.

Reduced FX volatility: Going forward, the revised hedging policy is expected to reduce FX volatility and the company expects minimal FX movements for 2H19. Also, the corporate costs going forward is expected to be approximately $15 million in FY 2019. This includes option costs, D&O insurance and other costs associated with supporting a growing global business.

On the price performance front, the stock has delivered a return of 40.13% on YTD basis. It is also currently trading slightly towards the 52-week high level indicating that the positives catalysts might have been discounted in the current market price.Currently, the stock traded at a higher PE multiple of 36.860x with EV/EBITDA multiple of 17.8x which are higher than the industry median (Hotels & Entertainment Services) of 16.1x and 9.3x, respectively, indicating that it might be overvalued at current market price of $14.810 per share, driving us to put our watch stance on the same.  
 

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