Over the last three months, shares in Flight Centre Travel Group Ltd (ASX: FLT) have fallen from $55 down to $50. The fall in share price has presented investors with an opportunity to purchase one of the highest quality ASX companies at a cheaper price.
Flight Centre has been a standout performer on the ASX over the past five years. Incredibly the share price has increased from $5 in 2009 to a high of $55 in March of this year. I believe the share price will continue to rise and reward investors due to the following:
1. Flight Centre dominates the Australian travel market and benefits from unrivalled scale and brand recognition which provides the company with significant buying power and pricing flexibility. With in excess of 2,000 stores, travel suppliers have little choice but to use Flight Centre as the primary travel distribution centre.
2. The demand for travel from Australians has increased substantially over recent times as a result of the increased capacity in the Australian aviation market which has resulted in lower airfares. Low-airfares will likely continue for the foreseeable future, resulting in strong demand for travel from Australians both domestically and overseas.
3. While the growth of online travel is a threat to Flight Centre, the company's blended online and traditional bricks-and-mortar offering ensures the company's online business offers consumers the largest range of products at competitive prices. Therefore the company's online business will likely provide strong earnings growth over the long-term.
4. Australian corporates continue to outsource more of their travel requirements to avoid the substantial administrative burden and costs. Flight Centre's corporate business generates over one-third of the company's earnings and will likely increase going forward as corporate Australian continues to outsource travel requirements.
5. The company recently announced the acquisition of Dublin-based Travelplan Corporate Limited which will further strengthen its European travel business.
Flight Centre should continue to grow earnings over the long-term and continue to reward investors. The current pullback in the share price presents a great long-term buying opportunity.
