3 best ASX travel shares of financial year 2021

The industry that arguably suffered the most from the COVID-19 pandemic produced some gem stocks, with investors betting on a revival.
The post 3 best ASX travel shares of financial year 2021 appeared first on The Motley Fool Australia. –

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.”

The post 3 best ASX travel shares of financial year 2021 appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of May 24th 2021

More reading

ASX 200 down 0.3%: SEEK record high, IGO jumps, Lendlease downgrade

5 lessons for ASX share investors from financial year 2021

Will ESG concerns really affect companies like Endeavour (ASX:EDV) and AGL (ASX:AGL)?
These were the worst performing ASX 200 shares in June

These were the best performing ASX 200 shares in June

Motley Fool contributor Tony Yoo owns shares of Corporate Travel Management Limited and Qantas Airways Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!