Insync optimistic on future of travel sector

Booking Holdings booking.com Insync covid-19 coronavirus Insync Global Capital Aware Insync Global Quality travel

8 April 2020
| By Laura Dew |
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Insync Funds Management has retained its holding in Booking Holdings despite a wider negative outlook for travel stocks as it expects it will ‘come out stronger’ from the crisis.

Shares in its online travel firm booking.com have fallen 34% since the start of the year but Insync said it expected the online travel booking sector would recover and come out stronger.

The stock is a 3% holding in both the Insync Global Capital Aware fund and the Global Quality fund.  

The fall is less than other travel booking firms such as Flight Centre and HelloWorld Travel which were both down more than 70% over the same period.

Earlier this month, Magellan said it expected there would be a ‘lasting reduction’ to the travel sector as a result of the COVID-19 restrictions.

The firm said it expected the online travel firm would get a ‘huge share’ of reservations once flight and travel restrictions were lifted.

Monik Kotecha, chief investment officer (CIO) at Insync, said: “Travel is still a global megatrend but clearly in the short term the industry is directly in the cross hair of this crisis. We believe the megatrend will strongly reassert itself but obviously certain sub-segments will be structurally impacted for a long time, such as the cruise industry, while others will come out stronger.

“Even if external travel takes 12 months to recover, domestic travel will recommence much earlier and Booking is well positioned.”

The CIO said he was particularly reassured by the firm’s profit margins and balance sheet which put in a good position for recovery.

“They have 40% profit margins. The management team are intensely ROIC [return on invested capital] focused and if there is not a demand for hotel rooms, which there will be certainly not be this year, they will slash ad spending more or less dollar for dollar with revenue declines.

“They have a rock-solid balance sheet with $6 billion of cash on their balance sheet and $2 billion available on their already-in-place borrowing facility.”

Performance of Global Capital Aware and Global Quality Equity fund over one year to 6 April, versus MSCI ACWI benchmark

 

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