It's been a rough couple of months for shareholders of Cover-More Group Ltd (ASX: CVO). Australia's largest travel insurer – which listed on the ASX in December 2013 – was trading as high as $2.44 per share in September 2014, but has since dropped to just $1.89 – a 22.5% decline.
So What:
The company recently announced a new partnership with Insurance Australia Group Ltd (ASX: IAG) in New Zealand, whilst also reconfirming its profit expectations for the 2015 financial year (FY) of between $53.8m and $56.9m.
Despite these announcements, investors could still be concerned about a slowdown in leisure travel spending, as reported by Flight Centre Travel Group Ltd (ASX: FLT). Flight Centre is Cover-More's biggest distribution partner (with an exclusive distribution agreement until 2019), so lower sales growth could directly impact Cover-More's own revenues.
Now What:
Investors should note that Australian outbound travel has remained extremely resilient over the years with levels having grown through terror alerts, disease outbreaks and even through the GFC. Regardless of whether Cover-More is impacted by these difficult trading conditions, its partnership with Flight Centre should help it generate strong growth in the long-run.
At its current price, the stock is trading on a price-earnings ratio of 19.7 times FY14 earnings and a dividend yield of 3.8% fully franked, making it seem like a very decent buy.
