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Background: Asiatravel.com is the best-known online travel and hotel reservation service provider in Singapore. However, its network extends well beyond Singapore to 79 countries in Asia, Europe, Americas, the Middle East, India and Africa. Its B2C website, www.asiatravel.com, facilitates consumer reservations of hotels, flights and tour packages, including day tours of Singapore and sale of theme park tickets.
In a nutshell: Asiatravel is transforming from a niche online hotel reservation site into a total travel reservation service provider. However, aggressive promotional and start-up costs will hurt margins in the short term although in the long run, the transformation should be positive.
Key ratios…
Price-to-earnings: 53.5x
Price-to-NTA: 3.1x
Dividend per share / yield: $0.006 / 1.5%
Net cash/(debt) per share: $0.012
Share price S$0.39
Issued shares (m) 241.6
Market cap (S$m) 94.2
Free float (%) 69%
Recent fundraising activities Nil
Financial YE 30 March
Major shareholders Boh Tuang Poh - 11.4%, Goh Khoon Lim - 9.4%, Vision Capital - 5.1%, Prudential Asset - 5.0%
YTD change -10%
52-wk price range $0.36-0.49
Our view:
Recent results poor... Since our last update, Asiatravel has announced two quarters that were bottomline-poor but not entirely surprising given its current emphasis on driving topline growth at the expense of margins. A&P expenses as well as staff salaries increased substantially due to the aggressive expansion in new products and new sales channels, including a new group-buying website, www.atcrazy.com, for products such as tour tickets, meal vouchers, hotel and flight packages and spa products.
…but topline growth strong. Still, the transformation has generated quite robust topline growth. For example, although Asiatravel suffered a $0.8m net loss in 2QFY Mar11, topline growth jumped 35% YoY, a surprisingly strong result given that the March quarter is a traditionally weak period. In addition, weakness this year would have been exacerbated by external events such as political turmoil in the Middle East and natural disasters in Japan.
Patience needed. Asiatravel’s current revenue growth strategies should help to drive faster growth in business volume and margins in the long term. For instance, it receives a higher service fee for sale of airfares compared to hotel and package sales. But the need to spend on advertising and promotions will still weigh on the bottomline in the next few quarters before positive returns are possible. Meanwhile, Asiatravel is considering M&A or other strategic alternatives to enhance value for shareholders.
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