Despegar: Top Online Travel Agent in Latin America at Bargain Price

Samir Mohamed presented his in-depth investment thesis on Despegar.com (US: DESP) at Best Ideas 2019.

Thesis summary:

Despegar, an Argentina-based, U.S.-listed company, is the largest online travel agent in Latin America. With its two-sided network of travelers on the one hand and travel suppliers (airlines, hotels) on the other hand, the company benefits from network effects and is gaining market share in a fragmented market. Despegar has a broad travel product portfolio with direct booking capability, giving the company several advantages over travel meta search engines like Trivago or Kayak.

With revenue of $524 million in 2017 at a 13.6% EBIT margin the company has a long growth runway to reach scale over the next 6-10 years. Due to macroeconomic challenges in Argentina and investor’s risk aversion towards Latin America the company’s share price has declined 50+% since the IPO in September 2017.

In a conservative forecast the company would have an EV/EBIT of about 3x in 2025 at the recent share price.

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About the instructor:

Samir Mohamed started with value investing in 1999 and manages a private family fund, full time since 2016. He focuses on good businesses with temporary problems and suppressed stock prices. Samir enjoys collaborating with other value investors regularly via in-person meetings or Skype calls. He was global head of the product management teams of a 170 Mio. EUR industrial business at Siemens. He worked at Siemens for 13 years. Samir has a master’s degree in Management, Technology, and Economics and a bachelor’s degree in material science, both from ETH Zurich. He recently relocated from Switzerland to Cyprus.