THL - Tourism Holdings

[Justin]

Too many uncertainty make the SP volatility recently, even the FCNZ and Forsyth Barr think different

[winner69]

Yes, it depends how that affects the share price, since that is quite a bit.

(a) Will it actually affect cash flow and the dividends in particular? Would they have increased the dividend just now if they thought they could use that cash to smooth over reduced dividend next time? I did not read the FY18 presentation as warning that the dividend will fall as a result? And in any case the following dividend is not forecast to be affected either way?

Simla — thl have never been shy to increase borrowings over the years to keep paying increased dividends ...free cash flow hasn’t covered dividends

[simla]

Yes, I've heard you on that one. Fair point. But I wonder what effect it will have on the share price if in fact they do not actually reduce the dividend and they are still looking to a sunny future. It seems to me that the market is running away faster than really is justified on any real logic?

[Scrunch]

Yes, I've heard you on that one. Fair point. But I wonder what effect it will have on the share price if in fact they do not actually reduce the dividend and they are still looking to a sunny future. It seems to me that the market is running away faster than really is justified on any real logic?

I'm with you on that one. The market capitalisation of THL has declined by about $200m since the end of June. Even if the $15m investment is repeated for a few years before being confirmed as a complete dud (which isn't what I'd expect to happen), it doesn't warrant a hit this large to the share price. Either Mr Market has got it wrong or its something other than this $15m expensed investment that's altering the share price.

Also, part of the reason why operational cashflow figures are weaker than you would normally expect is that rental vehicles purchases and sales are reported as operational cashflow. If the fleet expands quickly, operational cashflow is poor. If the fleet is stable or contracted, operational cashflow returns to "normal" or äbove normal levels. This differs from many other industries where expansion / contraction in capacity is an investing cashflow.

If you look at PP&E less borrowing, this figure has typically been stable or increasing. The borrowing could be viewed as financing dividends. It can also be viewed as financing PP&E that occurs from growing the size of the business. Over the last five years, PP&E is up $140m and borrowing is up $87m. Intangible assets and investments in associates have also grown. I thought borrowing to expand scale was pretty normal in many industries.

[couta1]

Mr Market suffers from Schizophrenia, would you trust an individual suffering from that condition to always get things right?

[winner69]

I'm with you on that one. The market capitalisation of THL has declined by about $200m since the end of June. Even if the $15m investment is repeated for a few years before being confirmed as a complete dud (which isn't what I'd expect to happen), it doesn't warrant a hit this large to the share price. Either Mr Market has got it wrong or its something other than this $15m expensed investment that's altering the share price.

Also, part of the reason why operational cashflow figures are weaker than you would normally expect is that rental vehicles purchases and sales are reported as operational cashflow. If the fleet expands quickly, operational cashflow is poor. If the fleet is stable or contracted, operational cashflow returns to "normal" or äbove normal levels. This differs from many other industries where expansion / contraction in capacity is an investing cashflow.

If you look at PP&E less borrowing, this figure has typically been stable or increasing. The borrowing could be viewed as financing dividends. It can also be viewed as financing PP&E that occurs from growing the size of the business. Over the last five years, PP&E is up $140m and borrowing is up $87m. Intangible assets and investments in associates have also grown. I thought borrowing to expand scale was pretty normal in many industries.

Scrunch ...how long do thl keep a new van before reselling it?

Isn’t a big part of their business buying/making vans and then selling them?

Aren’t van more a ‘cost of sale’ rather than capex (like industry plant with many years of expected life)

[winner69]

Mr Market suffers from Schizophrenia, would you trust an individual suffering from that condition to always get things right?

Not really ...just that Mr Market gets over excited at times and then reality hits home


thl was never worth $6.80 odd and now is just falling back to a more reasonable level. (Just like ATM was never worth $14.62 or TRA worth $3.80 or HBL worth $2.15 ... spot the pattern)


Here's how I see it on a PE basis anyway


Desperately need that acquisition to be announced to get the merry go round going again ...ie get some excitment going

[simla]

Competing points of view are always the most useful. Thanks.

[Justin]

Not really ...just that Mr Market gets over excited at times and then reality hits home


thl was never worth $6.80 odd and now is just falling back to a more reasonable level. (Just like ATM was never worth $14.62 or TRA worth $3.80 or HBL worth $2.15 ... spot the pattern)


Here's how I see it on a PE basis anyway


Desperately need that acquisition to be announced to get the merry go round going again ...ie get some excitment going

what’s the reasonable P/E for thl?

[iceman]

[QUOTE=winner69;733748]Not really ...just that Mr Market gets over excited at times and then reality hits home


thl was never worth $6.80 odd and now is just falling back to a more reasonable level. (Just like ATM was never worth $14.62 or TRA worth $3.80 or HBL worth $2.15 ... spot the pattern)


Here's how I see it on a PE basis anyway


Desperately need that acquisition to be announced to get the merry go round going again ...ie get some excitment going[/QUOTEst


Thanks winner for the interesting chart