Monday, August 13, 2018 at 3:03:15 PM GMT+10:00
The travel industry is a gigantic global industry with billions of people participating in travel abroad and domestically each year. Historically, the industry was marred with challenges for the average traveller including hours of research from innumerable resources, dependency on travel agencies, lack of pricing transparency, and unreliable tour operators.
Then along came TripAdvisor. TripAdvisor, now the world’s largest travel website, has been able to provide a platform that aggregates lodging, restaurant, and tour reviews from regular travellers, marrying it with the ability to seamlessly book everything in one place. While TripAdvisor’s peers have historically focused on covering only the supply side of hotel or flight inventory, this company has instead focused on cultivating and controlling demand. They invested heavily in their own website and mobile app, focusing on regular travellers and their experiences. As a result, TripAdvisor drives more traffic through its website than its competitors with approximately 455 million average unique monthly visitors. This number continues to grow as TripAdvisor has the largest and most updated network of travel reviews and has become the main resource for travellers all over the world.
Pengana Capital have identified TripAdvisor as being a high-quality asset with an attractive valuation, and invested in it for these main reasons:
Valuation – While TripAdvisor doesn’t look cheap on its current P/E ratios, it’s important to note they are in the middle of transitioning their instant hotel booking. Pengana Capital believe this business could be trading at 10x EBITDA (earnings before interest, taxes, depreciation and amortisation) on hotel bookings a few years out, while getting the entire non-hotel business for free, a very valuable niche.
Competitive advantage – TripAdvisor has a large, growing and highly engaged network which creates a substantial barrier to competition. It has more traffic than any other travel site and has built the dominant platform for non-hotel reviews that focuses on restaurants and attractions. It also creates a tremendous amount of value for the hotel channel, which it should be able to capture financially over time.
Margin Leverage – Not only do Pengana Capital believe the business has the capability to grow revenue significantly over time but they also believe that growth will come at very high incremental margins, which will drive up the overall operating margins and return profile of the business substantially.
This stock is currently held by the Global Small Companies Fund.
Any advice provided on this website is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. If any products are detailed on this website, you should obtain a Product Disclosure Statement relating to the products and consider its contents before making any decisions. Where quoted, past performance is not indicative of future performance.
Boardroom.media disclaims all and any guarantees, undertakings and warranties, expressed or implied, and shall not be liable for any loss or damage whatsoever (including human or computer error, negligent or otherwise, or incidental or consequential loss or damage) arising out of or in connection with any use or reliance on the information or advice on this site. The user must accept sole responsibility associated with the use of the material on this site, irrespective of the purpose for which such use or results are applied. The information on this website is no substitute for financial advice.
"Stay at home" Stocks To W...
Research AM Report
S&P/ASX All Technology Ind...
CSL Limited breaking recor...
SGX Stock Update
Research AM Report