Corporate Travel Management Ltd books US expansion deal: Will it fly higher?

Travel management business Corporate Travel Management Ltd (ASX: CTD) this morning announced the acquisition of Avia International Travel, a travel company based in the heartland of the U.S. energy industry, Houston, Texas. The acquisition will be effective September 1 2014 and entirely funded from current cash reserves.

Corporate Travel management provides travel booking and advisory services to business clients the world over and in the process saves them money, while taking a fee for itself.

The Avia acquisition is for US$4.125 million which is not exactly cheap at 5.5 times Avia’s most recent full year profit before tax, but does appear to fit nicely into Corporate Travel’s growth strategy. The main attraction perhaps being Avia’s heavy involvement in arranging travel for gas, oil, and marine businesses in the US energy industries in and around Texas.

Thanks in part to the shale gas energy revolution in North America, Texas has a strong economy with a positive outlook. The Lone Star state’s gross-domestic-product is a similar size to whole countries like Canada, South Korea or Australia.

Corporate Travel’s highly regarded chief executive and founder, Jamie Pherous, said: “It (Avia) possesses all the qualities that we look for, having a great service reputation, a dedicated team and great hands on management. The combination…will allow us to better leverage our combined buying power, client facing solutions, and support expertise moving forward”.

Corporate Travel management is expanding rapidly around the world and now operates out of 17 cities in 7 states in North America. It’s not dissimilar to Flight Centre Travel Group Ltd (ASX: FLT) in its aggressive approach to developing business and global growth potential.

Shares were flat at $6.60 on the news, although in my opinion Corporate Travel is a strong buy given the valuation and growth outlook.

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Motley Fool contributor Tom Richardson owns shares in Corporate Travel and Flight Centre. You can provide feedback on Twitter @tommyr345

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