Corporate Travel Management Ltd (ASX:CTD) shares have been bashed by short sellers and negative media reports recently, but analysts are bullish. Would it be crazy to buy shares?
About Corporate Travel Management
Corporate Travel Management is a provider of travel management solutions to the corporate market. They pride themselves on personalised service excellence and client-facing technology solutions, and these traits have helped them to win AFTA’s award for Australia’s Best Corporate Travel Management Company twelve times. They are currently operating throughout Australia, New Zealand, North America, Europe and Asia.
The Short Sellers
As a lot of readers would already know, Corporate Travel was the target of an extensive short seller’s report about six months ago. VGI Partners was the short seller, and they didn’t hold back, releasing a 176-page report detailing 20 ‘red flags’ from accounting policies to alleged empty offices.
The report crushed the Corporate Travel share price, pushing it from $27 down to $20. Since then, the share price has pushed back to $28 and fallen again to the current price just under $25 per share. Over the last six months, the share price has risen about 18%.
Media Piled On
Corporate Travel, with all this new attention, found itself in more hot water when the Australian Financial Review revealed that the CEO, Jamie Pherous, was falsely claiming to be a chartered accountant. It was alleged that, although he was a chartered accountant at some point in time, he stopped paying the registration fees and had failed to complete his Continuing Professional Development hours since at least 2013.
The AFR also made the claims that former Chairman Tony Bellas (who has since resigned) had breached ASX Listing Rules by only disclosing his sale of $4.5 million worth of shares five weeks after he had sold them. Other claims included inaccurate disclosure of shares held by Jamie Pherous and a warning that Corporate Travel could try to make an acquisition before the end of the financial year to obscure organic results.
While assumptions shouldn’t be made without more information, Corporate Travel did attempt an acquisition of UK-based competitor Capita Plc.
With short seller reports, media turning against them, the Chairman resigning and the CEO under fire, things weren’t looking good for Corporate Travel.
What Do The Analysts Think?
Corporate Travel was quick to respond to VGI’s short report, accepting fault for two of the ‘red flags’ while rebutting the other 18 as false or inaccurate. While some questions still remain, many analysts seemed satisfied with the response that Corporate Travel provided.
Bringing it forward to today, the share price has partially recovered, and most analysts are bullish on the company. According to the Wall Street Journal, the consensus price target for Corporate Travel is $31.08, roughly 25% above today’s price. Even the low price target is about $4 higher than the current price. With these price targets, there are five buy ratings and two hold ratings.
The analysts’ ratings could be justified by the double-digit growth reported in the 1H19 report for revenue, underlying EBITDA, statutory NPAT and EPS and the half-year dividend, all of which grew more than 20% on the prior corresponding period.
While the short report raised questions, I think Corporate Travel defended themselves with relative success and the share price could be undervalued.
However, there’s a lot of risk with investing in a company targeted by short sellers and media, so it might be safer to invest in one of the companies mentioned in the free report below.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.