Could the Corporate Travel Management Ltd (ASX: CTD) share price be worth considering? It has already risen by 28% in the 2021 calendar year to date.
What has been driving the Corporate Travel share price?
COVID-19 has had an outsized impact on ASX travel shares since early 2020.
Corporate Travel saw its shares drop around 75% from the middle of January 2020 to the bottom of the COVID-19 crash.
There was a large decline of demand and volume in 2020 because of the travel restrictions and various COVID impacts.
But now the business is starting to see a recovery.
The business reported that it saw a rapid return to positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the fourth quarter of the 2021 financial year, led by the company's increasing exposure to North America and Europe which are seeing a return of corporate travel.
The regions of North America and Europe currently generate close to 80% of group revenue, compared to 72% of pre-COVID pro forma 2019 revenue.
The Corporate Travel share price has risen around 3% since the release of the FY21 result. FY21 total transaction value (TTV) was down 65% compared to FY20 (where at least half the year was unaffected by COVID-19). Underlying net profit after tax (NPAT) fell 218% to a loss of $33 million, whilst statutory net profit sank 445% to a loss of $57.8 million
Corporate Travel disclosed that whilst the total FY21 underlying EBITDA was a loss of $7.2 million for the full year, it actually generated $13.6 million of positive EBITDA, which was $19.1 million stronger than the previous quarter.
Management are so confident about the recovery of the business, its cash flow and balance sheet that it's targeting a return to dividend payments in the 2022 calendar year.
The ASX travel share believes it will be a much larger business when COVID travel restrictions end, particularly after its acquisition of Travel & Transport last year.
FY22 outlook
At the end of FY21, Corporate Travel had $99 million of cash. It continues to assess potential acquisition opportunities that would support its global strategy.
In the first quarter of FY22, Corporate Travel is expecting continued positive underlying EBITDA, despite typically being the softest quarter. July delivered a record revenue result since the onset of COVID-19.
Corporate Travel is expecting growing EBITDA in the second quarter of FY22 as the northern hemisphere returns to offices after the summer holiday period.
The FY22 second half is expected to be generate more of the financial year's profit because of the rapid recovery in the northern hemisphere. It's also expecting the lucrative trans-Atlantic travel as well as regional Europe travel to open further. Vaccinations should also allow for a more predictable and "sustainably strong" Australian domestic travel environment.
Is the Corporate Travel share price a buy?
The broker Citi thinks it is worth looking at, rating it as a buy. Citi's price target for Corporate Travel shares is $26.06, which suggests that the Corporate Travel share price could rise by around 20% over the next 12 months.
One of the positives for the broker was its increasing market share in key markets.
On Citi's numbers, Corporate Travel shares are valued at 22x FY23's estimated earnings.
