Here’s which ASX travel stocks are taking off again
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Prior to COVID-19 a market wipe out was viewed as either an impossibility or an extreme scenario.
But COVID-19 has caused just that: entire business models have been wiped out by COVID-19 from forced closures and border restrictions.
ASX stocks in the travel and tourism sector are down on average 33 per cent in the last 12 months and only one sits in the green. The lucky winner is transport operator SeaLink Travel Group (ASX:SLK).
While the broader industry has been buoyed by the restart of domestic tourism, SeaLink has been further boosted after recently winning the tender to operate Brisbane’s ferry network.
It also won a five-year extension on Western Australian contracts due to expire this year.
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Five have more than doubled, one being Alliance Aviation (ASX:AQZ) which benefited from the need for charter flights as commercial flights came to a grinding halt.
Three others rising from their COVID-induced lows were entertainment venue operators Experience Co (ASX:EXP) and Indoor Skydiving (ASX:IDZ) and caravan operator Apollo Tourism and Leisure (ASX:ATL), all of which have benefited from eased restrictions.
While travel agency Helloworld Travel (ASX:HLO) also witnessed a market wipe out, it too is gradually seeing demand come back and undertook a $50m capital raising.
But with border restrictions expected to remain in place until well into 2021, it will be a long time before the travel and tourism industries start to resemble any kind of normal.
Investment bank JP Morgan told its clients in a report on Helloworld last week that it could benefit from an increase in travel complexity post-pandemic and reduced competition due to competitor network reductions.
While leisure travel will take some time to recover, government travel has continued and corporate travel is resuming. Both client bases will need help navigating quarantine and documentation procedures.
But for now, analyst Wei-Weng Chen maintained a neutral rating on the stock.
“We prefer stocks with high corporate exposure or exposure to opened international leisure markets such as Europe,” he said.
However, the JP Morgan report noted that the capital raising provided Helloworld with sufficient liquidity to operate until October 2021 even in a zero revenue scenario.
The opening of state borders and potential travel to New Zealand would also help in the interim.