The Corporate Travel Management Ltd (ASX: CTD) share price is an interesting proposition right now. ASX travel shares including Webjet Limited (ASX: WEB) were hammered on Wednesday but Corporate Travel’s value edged higher.
That’s symptomatic of what I think is Corporate Travel’s edge in the current market. Here are a few reasons I like the ASX travel share at $17.74 per share today.
Aggressive growth strategy
Corporate Travel has gone from the hunted to the hunter in the space of a few months. When the Corporate Travel share price slumped in the March bear market, distressed investors would have been eyeing off the travel group.
However, Corporate Travel’s fortunes and financial position have come full circle. The ASX travel group has restocked its balance sheet with a $375 million equity raise and announced the acquisition of United States-based Travel & Transport (T&T).
That to me sends a strong signal that Corporate Travel is back and looking to buy cheap assets to boost growth going forward.
Diversified international operations
One thing I like about Corporate Travel is its global diversification. Now, amidst the coronavirus pandemic, this is something of a double-edged sword.
Corporate Travel makes approximately 80% of its revenue offshore with key markets in the US and Europe. A second wave of COVID-19 doesn’t bode well in the short-term, but I think it does create opportunities.
Similar to the T&T opportunity, Corporate Travel has the expertise and experience to manage international assets. That could create some exciting operational opportunities in these markets and boost the Corporate Travel share price in 2021.
Strong earnings base is good for the Corporate Travel share price
Corporate Travel has an impressive online profile with the vast majority of customer transactions now completed online. That is good news given restrictions on bricks and mortar retail right now and travel agent store closures.
On top of that, I think the demand side of the equation is better for Corporate Travel than other ASX travel shares. As the name suggests, business travel is a key component of the company’s earnings. I think that’s a positive for the Corporate Travel share price in the current climate.
Business travel may be more resilient during COVID-19 compared to the leisure segment which could see restrictions and weaker demand hit the bottom line over a longer period of time.
The Corporate Travel share price is not everyone’s cup of tea. There is sure to be more volatility on the way thanks to COVID-19 and government restrictions.
However, I think the ASX travel share could be a strong buy for long-term investors who believe in the acquisition and efficiency story that management is telling right now.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and 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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