One of 2014's best performing small-cap stocks, Corporate Travel Management Ltd (ASX: CTD), today announced the details of the proposed acquisition of two smaller travel businesses in North America and the United Kingdom.
The UK travel business named, Chambers, is valued at $34.44 million, while the US travel business named, Diplomat, is valued at $7.13 million. Corporate Travel is seeking to raise $45.5 million via the issue of 2 new shares for every 35 existing shares held by eligible investors.
The acquisitions fit nicely into the company's stated strategic plan to establish a foothold in the UK and European markets, while continuing to grow in North America. The UK and Europe have been considered the final pieces in the puzzle to complete Corporate Travel's journey to global success.
The acquisitions are expected to contribute around $4 million in EBITDA over the six months of trading towards Corporate Travel's 2015 full-year result.
The capital raising is in the form of a renounceable entitlement offer, which is advantageous as eligible shareholders who do not wish to take up their rights may sell all or part of their entitlement on the ASX between December 5 and December 15.
Given that the $8.80 effective issue price of the new shares is at a steep discount to the price shares are currently trading on market at (around $10.50), it's likely most investors with spare cash will take up the offer.
The acquisitions mean Corporate Travel has again increased its full-year profit guidance to now be above $45 million. That means earnings growth can be estimated at more than 43% over the prior year, as shareholders enjoy the success of its global expansion strategy. The group has an ASX-listed role model in the phenomenally successful Flight Centre Travel Group Ltd (ASX: FLT).
Driving the success is the fact that Corporate Travel has easy to sell and understand travel solutions that rake in the new client wins. The company is able to deliver cost savings and a return on investment to clients, while making money for itself.
It's this growth recipe that means there could be more gains ahead, even though the stock has almost doubled in value over the past year alone.
Its worth noting travel businesses can be vulnerable to global health epidemics or terrorist acts. That's why it's important to hold them as part of a balanced portfolio.
