Buy This Stock to Play the Comeback in Business Travel

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American Express

Global Business Travel offers investors an attractive play on the continued revival in business travel. no. 1 in a fragmented market, it has a sticky blue-chip client base and an attractive business model that should offer leverage to increased travel.

AmEx GBT, formally known as

Global Business Travel Group

(ticker: GBTG), began trading publicly on May 31 on the New York Stock Exchange after it merged with

Apollo Strategic Growth Capital
†

a special-purpose acquisition company, or SPAC, sponsored by

Apollo Global Management

(APO). The shares now trade around $7.50, below the SPAC offering price of $10.

American Express (AXP) owns 35% of the company, and

Expedia

(EXPE), 16%. In 2014, AmEx sold half of it to a group led by Certares, an investment firm specializing in travel. AmEx GBT has the rights to use the American Express name into 2033.

Business travel has been slow to recover from the pandemic, but the pace is quickening. The company said its transaction volumefor hotels, flights, and suchhit 72% of 2019 levels in the final three weeks of April, up from 46% in the first quarter. Prepandemic, business travel grew by 4% a year.

AmEx GBT has a market value of nearly $3.3 billion, based on 451 million outstanding shares. But the public float is just four million shares, resulting in volatile trading. There are also about 39 million warrants (GBTG/WS), with a five-year maturity and an exercise price of $11.50, which trade around $1.25.

Key Data
Recent Price	$7.68
Market Value (buttock)	$3.5
Shares Outstanding (mil)	451
Current Share Float (mil)	4.1
2022E Revenue (buttock)	$1.75
2022E Ebitda (mil)	$80
2023E Revenue (buttock)	$2.40
2023E Ebitda (mil)	$527
Key Holders	American Express, Expedia, Certares

E=estimate

Sources: Company reports; FactSet

Reflecting the current investor aversion to SPACs, AmEx GBT raised just $42 million from the SPACa fraction of the more than $800 million heldwhile paying over $200 million in combined transaction costs and stock to

Apollo
†

Liquidity should improve after more than $300 million of stock sold to an investor group is freely tradable, probably in a month or two. The company could sell stock to increase its float. Reflecting the thin float, no analysts cover the company.

GBTG offers corporate clients an integrated travel-management platform. It is paid by clients for arranging travel services, and gets payments from travel providers. Its client base includes

Microsoft

(MSFT),

General Motors

(GM) and

Goldman Sachs Group

(GS).

When it reported a first-quarter loss in May, the company lifted its 2022 revenue forecast by $150 million, to $1.75 billion. It sees $2.4 billion in sales in 2023. It projected 2022 earnings before interest, taxes, depreciation and amortization, or Ebitda, of about $80 million, rising to $527 million in 2023, in line with 2019 levels.

The 2023 Ebitda estimate could prove conservative, given that it has cut annual costs by $235 million from a pre-Covid base and expects to get more than $100 million in synergies from the purchase of Egencia, a digital travel platform that it bought from Expedia last year.

The 2023 Ebitda estimate assumes business travel at 72% of 2019 levels. At 100%, 2023 Ebitda could top $800 million, it has forecast. AmEx GBT declined to comment.

AmEx GBT is valued at 7.5 times projected 2023 Ebitda, based on an enterprise value of $4 billion. That seems reasonable for this market leader.

write to Andrew Bary at [email protected]