Key Points: 

  • The key takeaway from the recent earnings season is the battle between rising inflation and pent-up demand for travel.
  • Pent up demand is winning for now, with revenues and earnings recovering towards pre-Covid levels.
  • Corporate Travel Management (CTD) is Morningstar's top pick in the leisure sector, trading at a 26% discount to our $23.50 valuation.

Transcript: 


Brian Han: The key take away in the leisure sector is this battle between release of pent up demand to travel, to have a good time after 2.5 years of COVID imprisonment, and then on the other hand, the rising cost of living. And the impact of inflation and interest rates on consumer spending.

Now in that battle, the release of pent up demand is winning out and that's why all these leisure companies, their revenues are coming back very strongly and their earnings are improving quite rapidly. Now the impact of rising interest rates and inflation and cost of living, they will eventually bite. But at least for the next year or so, we still believe that those earnings of these leisure companies will continue to recover back to their pre COVID levels.

So in that leisure sector, our best pick is Corporate Travel Management, ASX CTD, trading at a 20% discount to our $23.50 valuation. It is concentrated in the business travel sector whereby demand is coming back even stronger, than leisure travel activities and this stock has no debt. This company has no debt and quite good management and it is winning new accounts in that corporate sector. So that is our best pick in the leisure sector.