The Corporate Travel Management Ltd (ASX: CTD) share price is up more than 4% after the ASX travel share announced a share buyback.
Corporate Travel Management is one of the biggest travel companies servicing business travellers.
Corporate Travel Management share price
Corporate Travel share buyback
The company announced today that it is implementing an on-market share buy-back program.
It’s going to re-purchase up to a maximum of $100 million worth of Corporate Travel Management shares, starting on 15 November 2023 and ceasing on 13 November 2023.
Corporate Travel will only buy shares when it considers it beneficial for efficient capital management, so it’s dependent on “market conditions, volumes and other relevant factors.”
Prices paid for shares purchased under the buy-back will be “no more than 5%” above the average price of Corporate Travel shares over the five trading days before the purchase. The buy-back will not exceed 10% of Corporate Travel shares on issues over the 12-month period.
Corporate Travel will tell investors about the number of shares purchased under the buy-back and the average price.
What’s the benefit of a share buyback?
The company explained that the share buyback “enhances” shareholder returns and “complements the company’s intentions to pay dividends in the future.”
Shares bought under the buy back will be cancelled, so the number of shares will reduce. This can be useful for various company statistics such as the profit / earnings per share (EPS). It could also enable the company to pay larger dividends, or reduce the dividend payout ratio.
It can also increase the Corporate Travel Management share price because fewer shares means the value of the business is being divided between a smaller number of shares.
Final thoughts on the Corporate Travel share price
Since the end of July 2023, Corporate Travel has fallen by around 20%. That’s a big fall over a relatively short period of time.
I’d call it a longer-term buy at the current price of around $17, though there could be plenty of ups and downs. Demand remains strong, so the market may be underestimating the business, and profit margins are still rising.
