Thankfully, Australia is now in a position where many COVID-19 restrictions and state borders are starting to lift. I think this could mean good things for domestic tourism. There are some ASX shares that could benefit.
Here are three ideas if you’re wanting to play that domestic tourism theme:
Sealink Travel Group Ltd (ASX: SLK)
This ASX share is the largest (according to Sealink) integrated land and marine, tourism and public transport service provider with international operations in London and Singapore.
Its ferries operates across various regions including Sydney Harbour, Kangaroo Island, the Murray River, Rottnest Island and Stradbroke Island. It also has a large network of bus services under the Transit Systems brand.
In FY20 it grew its underlying net profit after tax and before amortisation by 47.2%, which was a solid result.
The company has fairly defensive earnings with the bus networks, whilst the tourism side of things could see a recovery in the coming months.
At the current Sealink share price it’s priced at 15x FY23’s estimated earnings.
Ingenia Communities Group (ASX: INA)
Ingenia owns a number of holiday parks around Australia. In August and September it has seen a significant increase of bookings in August 2020 and September 2020 compared to 2019. Revenue booked through the parks and Ingenia Holidays website in the first quarter were up over 50% compared to the prior year.
According to Ingenia, border closures due to COVID-19 have increased demand for intrastate travel. People want coastal locations with driving proximity to capital cities, this is the area experiencing the strongest demand.
Still on the holidays side of things, September occupancy was up to 61.2% with revenue per occupied room (REVPOR) up 11% to $84.31.
At 13 October 2020, 12-month forward bookings were up over 50% compared to October 2019.
The ASX share’s management said that the eventual opening of the Victorian and Queensland borders are anticipated to drive further strong demand, particularly for the NSW south coast, NSW far north coast and tropical Queensland parks.
Another trend that the business is benefiting from is that it’s building an impressive number of retirement rental accommodation. This is helping rental revenue to steadily grow, it has a high occupancy rate and its lifestyle village margins continue to increase.
At the current Ingenia share price it offers a distribution yield of 2.1%.
Star Entertainment Group Ltd (ASX: SGR)
This casino business owns Star Sydney, The Star Gold Coast and Treasury Brisbane. It also owns Sheraton Grand Mirage on the Gold Coast in a joint venture and manages the Gold Coast Convention and Exhibition Centre on behalf of the Queensland government.
Star seems like the safer bet at the moment compared to its main casino competitor that is facing difficulties about its casino licence in NSW. Star’s main casino isn’t suffering from strict COVID-1 restrictions either.
The ASX share owns some great assets that I expect will see rising activity in the coming months as borders open up again.
The casinos are still missing some VIP visitors from overseas, but at some point those people are going to be able to come back – maybe during 2021.
At the current Star share price it’s still down 23.4% from the price on 16 January 2020. When you consider how low interest rates are, I think its assets may be undervalued for the long-term.
It’s valued at 13x FY23’s estimated earnings.
I think each of these ASX shares look very interesting as short-to-medium buys whilst Australians are stuck in Australia. Ingenia would be the one I’d be happy to own for the longest because of the retirement villages tailwind. In the shorter-term, I think I’d go for Sealink with its diversified growth aspirations.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.