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Readers of this column know I love a good trend. And that few trends are as compelling as growth in Asian middle-class consumers over the next two decades. An expected 2.5 billion extra consumers within Asia by 2030 will change everything for global business.

The column has written about this trend several times for The Bull, notably in April 2013 when it identified South East Asia-based online advertising companies iProperty Group and iCars Asia. Both have soared over two years and look like takeover targets.

Growth in middle-class Asian consumers will also create huge opportunities within Australia. Consider the potential for inbound tourism from Asia and the effect it will have on our tourism providers.

Overall, there were 6.8 million visitor arrivals to Australia for the year to September 2014, up 8.2 per cent from the previous year. There were 641,000 visitors from China for the nine months to September 2014, up 14.3 per cent on a year earlier. Indian visitors rose 17.8 per cent and Malaysian arrivals were up for 23.7 per cent, off a lower base.

It’s hard to see that trend reversing as Asian consumers with rising incomes look to travel overseas, and as a falling Australian dollar relative to key Asian currencies makes it cheaper.

Inbound Asian tourism is powerful short- and long-term trend for our operators that cater to this market. The falling Australian dollar is another tailwind as it attracts more inbound tourism, makes Australia cheaper relative to other offshore destinations, and discourages more Australians from travelling overseas.  

Choosing stocks that benefit from this trend is harder. Obvious beneficiaries such as Sydney Airport look fully valued, as do mid-cap stocks such as Gold Coast theme-park operator Ardent Leisure Group. Both are excellent companies, just a bit pricey at present.

SeaLink Travel Group, a small-cap tourism operator, has had relatively less attention. The owner of passenger ferries and travel cruises, under the SeaLink and Captain Cook Cruise brands, raised $16.5 million and listed in October 2013. It almost floated in 2008, but the offer was pulled before prospectus lodgement when demand for IPOs evaporated during the Global Financial Crisis.

The delay was worth the wait, as SeaLink came to market as a more established business. Its $1.10 issued shares have rallied to $2.39 after it posted a better-than-expected interim profit report. SeaLink’s one-year total shareholder return (including dividends) is 36 per cent. It is among the best-performing floats in the past few years.

Chart 1: SeaLink Travel Group

Source: ASX

After-tax net profit of $4.7 million for the first half of FY15 was 37 per cent ahead of the same period a year earlier. Revenue grew 9 per cent to $57.2 million and SeaLink said it was “well positioned” to improve on its first-half results.

It appears to be in a sweet spot. The lower Australian dollar is making local tourism more competitive and helping SeaLink’s New South Wales and South Australian businesses.

Having a big chunk of the business operating out of Circular Quay in Sydney is a great position as international tourists to Australia typically head first to Sydney. Higher tourism to South Australian tourism hotspot Kangaroo Island, which SeaLink services, is another positive.

Lower fuel costs, courtesy of the lower oil price, are helping SeaLink and it says a gradually improving world economy is starting to lift world tourism activity.

 SeaLink is not cheap. Estimated earnings per share of 13 cents in FY15, according to a small number of consensus forecasts, put it on a prospective Price Earnings (PE) multiple of 18 times – high for a small-cap industrial company.

But it can grow faster than the market expects as the low currency prices/low fuel prices/influx of Asian tourists drive demand for its ferry cruises. Higher exposure to New South Wales, Australia’s best-performing economy, is another plus. Nevertheless, SeaLink is best bought on price weakness after the current share-price rally slows, closer to $2.

Debt is modest: net gearing was 16 per cent in FY14 and interest cover was almost 10 times. Return on equity of 13.4 in FY14 was solid rather than spectacular, but should rise in coming years as earnings grow.

For those with a long-term perspective, owning a well-established, well-run travel operator with strong exposure to growing tourism demand from Asia appeals.

–    Tony Featherstone is a former managing editor of BRW and Shares magazines. This column does not imply any stock recommendations or offer financial advice. Readers should do further research of their own or talk to their adviser before acting on themes in this article. All prices and analysis at February 12, 2015.