ASX travel shares arguably copped the biggest blow from the COVID-19 pandemic.
Every country suddenly found itself fighting an invisible enemy. And one of the bluntest ways to control the spread of the virus was to close the borders.
Australia, as an island nation, was one of the first to go down this route.
Then Australia, as a federation, saw its constituent states shut their borders to each other.
So not only did the travel industry find itself with no international revenue, domestic sales dried up as well.
But this catastrophe has also meant some travel businesses were in for a spectacular recovery out of the crisis over the 2021 financial year.
The 3 best-performing travel shares from the past 12 months out of the All Ordinaries Index (ASX: XAO) were:
- Sealink Travel Group Ltd (ASX: SLK): up 115.5% in the 2021 financial year
- Corporate Travel Management Ltd (ASX: CTD): up 111.5%
- Alliance Aviation Services Ltd (ASX: AQZ): up 53.2%
Eley Griffiths portfolio manager Nick Guidera told The Motley Fool that stocks like these showed just how productive it was to put money into travel the past 12 months.
"If you had invested in Sealink and Corporate Travel as the peak of the pandemic infection in Australia was subsiding (June 2020), you would have more than doubled your money," he said.
"The travel subsector has significantly outperformed both the consumer discretionary sector and the broader S&P/ASX 200 Index (ASX: XJO) by more than 90% during the past year."
Sealink still presents a 'significant opportunity'
Transport and tour provider Sealink enjoyed several boosts during the 2021 financial year, according to Guidera.
"Sealink has benefited from a number of factors including the renewal of its key bus contracts in [Western Australia], [South Australia] and Singapore, which the company acquired as part of the Transit Systems acquisition in late 2019," he said.
"At the same time, its domestic tourism assets and government-backed maritime routes have seen a surge in demand as Australian's have been forced to holiday at home."
Despite doubling its value, Guidera reckons the stock has more climbing to do.
"I think there is a significant opportunity in Sealink. The Transit Systems earnings are broadly de-risked and a significant pipeline of future bus contract opportunities — more than $500 million — are expected to be potentially awarded in the coming months," he told The Motley Fool.
"Tourism assets provide continued leverage to domestic tourism, as well as future upside when international tourists return. The stock is trading broadly in line with 12-month averages despite a significantly improved outlook."
Corporate Travel looks expensive now
As the player with the best balance sheet in the industry, Corporate Travel was a darling among ASX investors, according to Guidera.
"[It] was and is in a position to reach a break-even point faster than its leisure competitors."
The company even had enough money to acquire US player Travel & Transport Inc last year.
"CEO Jamie Pherous didn't waste a good crisis and used his balance sheet to acquire a sizable business in the USA, which will bring scale to the existing operations at a very attractive price," said Guidera.
"Corporate Travel is well placed to take advantage of the significant growth in US airline passenger numbers month-on-month, as a vaccinated US economy continues to reopen."
But the doubling of the share price in the past year has put Guidera off somewhat.
"On near-term earnings forecasts, [travel] agents such as CTD look expensive," he said.
"However, on FY23 numbers, which many are hoping is more reflective of 2019 conditions, valuations are more appealing."
Alliance's growth could come regardless of economy
The little airline services provider is a favourite of Montgomery Investment Management chief investment officer Roger Montgomery.
Like Corporate Travel, Alliance bought up useful assets last year at a pandemic discount.
"Last year, Alliance took advantage of slumping global travel, announcing it would spend just $197 million to acquire 30 Embraer E190 aircraft, lifting the number of planes in its fleet to 66," he said in a blog post.
"These prices are cents on the dollar of the original capital cost of the assets. This is Alliance's key competitive advantage, great operational on-time performance from the lowest capital cost aircraft in the market."
The company 'wet leases' aircraft to the big rivals like Qantas Airways Limited (ASX: QAN) and Virgin Australia.
"Wet leases are agreements between two airlines, where the lessor agrees to provide an aircraft, crew, maintenance and insurance to the lessee in return for payment on the number of hours the aircraft is operated, irrespective of how many passengers are on the plane or the price they paid for their seat."
Montgomery is convinced the stock will continue its ascent from the financial year end price of $4.55.
"We believe it is worth in excess of $5.00 per share."
