TBO TEK shares rise 7% in three sessions; Jefferies sees 15% upside

TBO TEK shares rose 5.3 per cent on Tuesday and logged an intra-day high at ₹1,655 per share on BSE; stock gained nearly 7 per cent in three trading sessions

TBO TEK shares rose 5.3 per cent on Tuesday and logged an intra-day high at ₹1,655 per share on BSE. The stock gained nearly 7 per cent in three trading sessions after the company announced it would acquire Classic Vacations, a premium US-based luxury travel wholesaler.

 

At 11:06 AM, on BSE, TBO TEK’s share price was trading 3.43 per cent higher at ₹1624.4 per share. In comparison, the BSE Sensex was up 0.26 per cent at 80,997.

 

The market capitalisation of the company stood at ₹17,639 crore. The 52-week high of the stock was at ₹1,891.55 per share, and the 52-week low was at ₹985.7.  FOLLOW STOCK MARKET LIVE UPDATES

How will the acquisition benefit TBO TEK? Jefferies decodes 

Global brokerage Jefferies, in its report dated September 7, maintained ‘Buy’ on the stock and has raised the target to ₹1,800 from ₹1,625, along with earnings per share (EPS) estimates by 2 to 6 per cent on the back of acquisition benefits.

 

The target price translates to 14.6 per cent upside to Monday’s close of ₹1570.55 per share.  

 

The brokerage believes this marks as the company’s first material acquisition since Jumbonline in Europe (2023), in line with its roll-up strategy of incubating new source markets.

 

The deal, for about $125 million, significantly strengthens TBO’s presence in the premium outbound travel market, particularly in North America, which currently accounts for just 5 per cent of overall gross transaction value (GTV), the brokerage noted. 

About Classic Vacations

Classic Vacations, a five-decade-old B2B2C platform, works with US travel advisors to book luxury holidays across North America, Hawaii, the Caribbean, and Europe. The platform is positioned in the high-end travel space, with average daily hotel rates of more than $1,000 against TBO’s $250 and average booking values of $8,600 compared with TBO’s $600. Formerly owned by Expedia Group for two decades before being acquired by The Najafi Companies in 2021, Classic Vacations reported CY24 GTV of $0.5 billion compared with TBO’s $3.6 billion, revenues of $111 million, and Earnings before interest, tax, depreciation and amortisation (Ebitda) of $11.2 million.

Cross-sell opportunities

The acquisition, funded through a mix of internal accruals and $70 million in debt, gives TBO access to Classic Vacations’ strong US consortia relationships and a portfolio of 1,500 premium hotels that will gradually be integrated into TBO Platinum, its curated luxury platform. Management highlighted that Classic’s longer booking window of 140–245 days, compared with 60 days for TBO, and its negative working capital cycle, strengthen the company’s operating profile.

Strategic importance

Although Classic’s reported Ebitda margin of around 10 per cent is lower than TBO’s 17 per cent, its Ebitda and PAT contribution to GTV is superior at 2.4 per cent and 1.9 per cent, respectively, against TBO’s 1 per cent and 0.7 per cent. Analysts estimate the deal could deliver a 20–40 per cent increase in revenue and Ebitda.