STRONG FINANCIAL PERFORMANCE CONTINUES: Core businesses growing at over 20% CAGR, with no LT debt and almost $20M in cash. Kiosk program in full swing.
We believe the Company is continuing to execute well while also making good strategic decisions, such as the divestiture of its air shipping business. This strategic move has left the Company completely focused on air ticketing, travel and hotel reservations, and travel package sales, all of which are strategically consistent. The Company has also shown solid organic growth in each of its businesses, as evidenced by revenues and earnings, its recent move into another region of China, and its accelerating kiosk rollout.
Company Overview
Universal Travel Group trades on the American Stock Exchange (AMEX) under the symbol UTA. Based in Shenzhen, China, the company’s operates three primary lines of business: air ticketing, tours and packaged travel, and hotel reservations; it recently divested its air cargo business, which was shrinking and had relatively low margins. Although the Company has historically had overall gross margins in the 33% range, we expect an improvement to the 36% - 37% range based on the shipping business divestiture. Air Ticketing is rapidly growing and has almost 95% gross margins, so we could continue to see gross margin improvement in the coming quarters. Given the Company’s relatively stable operating expense base, we also believe that there is significant operating leverage in the business, which should lead to ever-improving net margins as the Company continues to grow sales.
Since making its key business acquisitions in 2007 and 2008, the company has developed an integrated offering for Chinese and foreign travelers, that includes a fully-featured Web-based system and a recently-introduced Kiosk system that the Company is aggressively rolling out (now 150 locations). This offering’s popularity1 has been driving the exceptional growth in the Company’s highest margin businesses, and we expect the large-scale rollout of its well-received Kiosk system to extend this trend. The Company plans to have between 600 and 1,000 kiosks in operation by the end of this year.
The Company also boasts a seasoned management team that has demonstrated the ability to grow the business while controlling costs, and to successfully acquire and integrate several related enterprises.