S&P/ASX 200 Index (ASX: XJO) travel share Corporate Travel Management Ltd (ASX: CTD) has seen plenty of ups and downs in February. But despite its share price movements – and its 20% rise in 2022 – I think it's a buy.
I believe Corporate Travel Management is one of the leaders in the world at what it does, and it has achieved a sizeable global market share.
After seeing the company's FY23 half-year result, I think it looks compelling with normalised travel conditions.
Earnings recap
In the first six months of the 2023 financial year, the total transaction value (TTV) grew by 102% to $4.2 billion, revenue increased 79% to $291.9 million, and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 182% to $51.3 million.
It achieved underlying net profit after tax (NPAT) of $22.1 million, up from a loss of $0.4 million in the prior corresponding period. Statutory NPAT was $15.7 million, up from a loss of $10 million.
The ASX 200 travel share's half-year result was a record for both TTV and revenue.
Corporate Travel Management has been through such a recovery that it decided it was strong enough to declare an interim dividend of 6 cents per share, following on from the 5 cents per share dividend at the end of FY22.
Why I think the Corporate Travel Management share price is a buy
The business spoke of "strong momentum" going into the second half of FY23 through "significant new clients transacting and activity recovery".
Corporate Travel Management gave exciting guidance. It said that FY23's underlying EBITDA is expected to be between $160 million to $180 million with an underlying profit before tax range of between $120 million to $140 million. Both of these would be record results, beating the pre-COVID FY19.
This assumes a second-half EBITDA of $109 million to $129 million which would ensure "great momentum for the expected FY24 full recovery."
Management expects a stronger EBITDA margin in the second half because of further supply chain stability, positively impacting productivity and revenue.
In terms of a trading update, the ASX 200 travel share said that travel demand "remains strong with no signs of macroeconomic factors impacting the recovery".
Europe is expected to be its largest contributor in the second half of FY23. In fact, January saw a record profit, even though it's a seasonally weak month.
In terms of the Corporate Travel Management share price valuation, Commsec numbers put the ASX 200 travel share at 18 times FY24's estimated earnings and under 16 times FY15's estimated earnings. I think that's a good price as earnings and the dividend grows.
