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Corporate Travel share price falls 6% on coronavirus concerns

The Corporate Travel Management Ltd (ASX: CTD) share price has tumbled 6.29% to $18.92 at the time of writing, joining its fellow ASX travel companies in their downward slide today.

Why are ASX travel shares under pressure today?

The travel sector has come under pressure today due to concerns around the ongoing coronavirus outbreak, with a number of shares seeing their value plummet.

Other travel shares that have been impacted on Tuesday include Flight Centre Travel Group Ltd (ASX: FLT), Qantas Airways Limited (ASX: QAN), and Webjet Limited (ASX: WEB). Also impacted has been Crown Resorts Ltd (ASX: CWN), which is heavily linked to the travel industry. Webjet was the worst performing of this group with its shares down by 11.1% to $12.77 at the time of writing.

A growing number of Chinese cities have placed restrictions on travel in an effort to contain the virus. In addition, the United States (US) government has already given a recommendation to avoid travelling to China.

Chinese health authorities have confirmed the coronavirus has killed just over 100 people so far and infected 4,000 globally, the vast majority of whom live in China. Four of Australia’s 5 confirmed cases are in NSW, and in the US more than 100 people are being evaluated for possible infection.

The coronavirus outbreak could significantly affect Australia’s travel sector, particularly if more travel restrictions are imposed on international travel to slow down the spread of the virus. Tourists from China now account for over 15% of total short-term inbound travellers to Australia, as compared with just 4% in 2003, according to an Australian Financial Review article sourcing Moody’s.

How has Corporate Travel performed recently?

Last year, Corporate Travel reported its FY19 earnings before interest, tax, depreciation and amortisation (EBITDA) rose 20% to $150.1 million, the top end of guidance, and it grew its revenue by 21%.

Despite what looked to be a solid result, investors appeared disappointed with the company’s guidance for the year ahead. Management advised that it expected underlying EBITDA of between $165–175 million. This equated to year-on-year growth of only between 10–17%, which was lower than market expectations.

More than 70% of Corporate Travel’s revenue base is generated outside of Australia and New Zealand, with its reach extending to the UK, Europe, Asia and North America. This percentage is also growing, with 72% of its revenue generated outside of the Australia and New Zealand region in FY19, up from 70% a year prior.

So far, the second half of FY20 has proved to be stronger than the first half for Corporate Travel, with its Australia and New Zealand segment performing solidly due to recent client wins.

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Motley Fool contributor Phil Harpur owns shares of Corporate Travel Management Limited and Webjet Ltd. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited, Crown Resorts Limited, and Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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