ASX travel shares are the talk of the town with the world starting to open up again.
But most stocks in that sector already have high valuations that have post-COVID recovery built in.
That's despite some, like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB), having to raise massive capital and debt just to survive.
But one fund manager has called out one ASX travel share he believes is in a better position now than before the pandemic.
Image source: Getty Images
Time for adventure
Australian adventure tourism provider Experience Co Ltd (ASX: EXP) intrigues Forager Funds senior analyst Alex Shevelev with its potential.
The company supplies experiences like sky-diving, rafting, canyoning, kayaking, helicopter and boat tours, snorkeling and diving, and hot air ballooning.
Shevelev said the business went off the rails a tad before the coronavirus pandemic arrived.
"We had a management team that went on an acquisition spree in far north Queensland," he told a Forager video.
"A lot of those investments have had to be curtailed by the current management team, and they've [now] really got the business in good shape."
The Experience Co share price has remained flat since the start of the year, when it was trading for 24 cents. On Tuesday, the stock dropped 1.82% to sit at 27 cents at market close.
That's now roughly the same level as just before the COVID market crash in March 2020.
With the vaccine rollout bungled in Australia, Shevelev anticipated the world outside of New Zealanders could start arriving in Australia next year.
"The willingness of travellers to come to Australia will be a factor, but really that should start to restart sometime in 2022 and should give those businesses a cleaner 2023 financial year."
Despite the delays in inbound international tourism, Shevelev liked what the Experience Co executive was currently doing.
"They've got a focused plan and a strategy to recover again to earnings that were higher than pre-COVID."
An intriguing Kiwi business
Shevelev also mentioned New Zealand company Tourism Holdings Ltd as another travel share with huge post-pandemic potential. In fact, the stock is Forager's biggest travel holding currently.
From mid-2018 to the COVID-19 crash, its shares tumbled from NZ$6.76 to NZ$2.49.
According to Shevelev, there was one massive factor in its misfortunes.
"The US business was unable to sell the vehicles at quite the prices that they wanted because of an oversupply of vehicles."
After the pandemic arrived, people wanted to avoid public transport. Countries like Australia and the US saw demand for second-hand cars surge.
"A lot of people had sought second-hand vehicles in the US – and that market really cleared up," he said.
"It has an excellent management team. The business is really primed to actually take share and to recover to better levels of earnings than was expected prior [to COVID] because… they've really taken advantage of the downturn."
