THL - Tourism Holdings

[Benny1]

Back in 1997 or so, I was a bartender in Chicago. I has saved my first $10,000 and wanted to do something for my "future self." A lot of big traders came in to the bar I worked at and I asked for some advice. I told one of these guys I was considering buying Walgreens stock. He said, "Do you want to be a wealthy man? If so, take that 10,000, buy that stock, and request those certificates. Then put them in a drawer and don't even THINK about opening it for another 20 years. For years I wanted to get those things out and sell them. The stock would go up, it would go down, and I worried I would lose all my money.

But in the end I waited those 20 years and now that 10,000 has secured my future for a long time. When you are almost positive a company will grow in the foreseeable future, they have produced great results in the past, and you believe in the validity of your research, this is how you build wealth. I firmly believe THL is one of these kinds of companies. So many people want to come to New Zealand, and it's not remotely expensive relative to what it used to be even 20 years ago. This is a "drawer" stock as far as I'm concerned. Sure the craziness in the US market, the fact it shot up so quickly in the last few months, and a high PE may have a slight affect on the stock in the short run, but who cares? Put it in the drawer and look up in 2022 when it's at 10+ if you must. That's my play here.

Yep exactly my thoughts on this one.
The only thing I will add is " as long as the present CEO and Chairman stick around". I believe this company is on excellent hands at the present time.
This is definitely one for my bottom drawer...I do open it every now and then...but it's only to allow a few more shares in !

[hardt]

No argument its a good company with sound long term growth prospects. I wouldn't for one second try and make any case otherwise.
The point of contention as far as I am concerned is whether this is already fully built into the SP ?
The tripling in SP in the last 3 years is well ahead of earnings growth and has been predicated upon a quite considerable expansion in the PE multiple. The 50 cent jump from $5.50 to $6.00 just before Christmas was based on the tax rate change in the U.S.
The SP is fine if the growth continues at pace but this is now a more heavily geared business than it was so the risk profile has changed and any prudent investor needs to recognize that.

THL's SP performance reminds me very much of the time when RYM's SP tripled in three years leading up to 2014 to ~ $8.50 when I called it as overdone and although nobody would argue against RYM also being a fine company the fact is until very recently the SP did ostensibly nothing for the following three years simply because it got to far ahead of itself in 2014.

None of this will be any concern to young ones planning to hold this for the next decade but anyone approaching retirement can be forgiven for asking themselves is there better value and growth at a cheaper price SUM where else in a needs based business ? I made the correct call on RYM nearly 4 years ago and its SP has materially underperformed the market since then despite being a great company with solid growth and an excellent outlook.

I'm going out on a limb here and making the call that there's growth companies at a cheaper price elsewhere. I could be wrong but am happy to back my own judgment and have the stretched PE of RYM example to support my thesis. Good luck to holders and as mentioned if you're in for the very long haul I think you should do well, just keep that seat belt fastened All that said I'm overdue to get something badly wrong, maybe its this one...

Leading up to 50M NPAT by FY2020 = 18.56% CAGR trading at 22PER

Pay-out ratio of 80-90%

THL 3YR PEG RATIO = 1.185
THL 3YR ACCUMULATED DIVIDENDS AT 80% = ~$0.85 per share
THL EV = $850M
THL PRICE = $670M

I don't think it's all that pricey... then again, I am a bubble boy so wadda I know.

It might not be a double bagger from here in the next 3 years, but it certainly does not look to have moved past it's fundamentals.

In respect to RYM, it was trading at almost triple the sectors mean PER at that time...
RYM was trading at 40x earnings at the time while providing ~15-20% growth.

2015 RYM PEG RATIO = 1.95

I don't see them as the same fish, hope I am right about that.

[winner69]

Leading up to 50M NPAT by FY2020 = 18.56% CAGR trading at 22PER

Pay-out ratio of 80-90%

THL 3YR PEG RATIO = 1.185
THL 3YR ACCUMULATED DIVIDENDS AT 80% = ~$0.85 per share
THL EV = $850M
THL PRICE = $670M
THL EQUITY = $200M

I don't think it's all that pricey... then again, I am a bubble boy so wadda I know.

It might not be a double bagger from here in the next 3 years, but it certainly does not look to have moved past it's fundamentals.

In respect to RYM, it was trading at almost triple the sectors mean PER at that time...
RYM was trading at 40x earnings at the time while providing ~15-20% growth.

2015 RYM PEG RATIO = 1.95

I don't see them as the same fish, hope I am right about that.

Added Equity to your list .... current P/B of 3.3 ....hmmm

[hardt]

Added Equity to your list .... current P/B of 3.3 ....hmmm

"We are aware of those views and understand the theory behind them. thl is an asset intensive business and the motorhomes are a replicable asset. There are two key elements to that which I would consider aren’t necessarily being accounted for appropriately. First is our competitive advantages – primarily scale, experience and market penetration. We do believe our channels to market, our brands, their heritage and the technology that we have developed enable us to create and sustain demand that provides us with a competitive advantage. Along with scale on an international basis, we have the opportunity to sustain our customer base. Secondly is the barriers
to entry. The business model is build/rent and sell. Each aspect of the model requires a different type of infrastructure and licences. The asset intensity of the industry also creates its own barrier. Throughout the global financial crisis, we saw a sustained tightening in the credit requirements for our industry internationally. Today there are strong equity requirements and covenant packages that ensure a disciplined approach to capital deployment and returns is critical. These are qualities that thl has had for many years and any new competitors need to abide by. Regardless, time will tell and we will continue to build our competitive advantages."

http://pages.stern.nyu.edu/~adamodar/ - Global average PBV 3.6X

Apollo Tourism trading at PBV 3.2x

Tourism Holdings trading at PBV 3.3x

Debt is not the devil

[Beagle]

Yep exactly my thoughts on this one.
The only thing I will add is " as long as the present CEO and Chairman stick around". I believe this company is on excellent hands at the present time.
This is definitely one for my bottom drawer...I do open it every now and then...but it's only to allow a few more shares in !

Rob Campbell was looking old and quite portly at the SUM annual meeting in April 2017. I hope for shareholders sake in SUM, THL and the other directorships he holds he's taking steps to manage his weight / health better. He's a legend, no question about that.

Hardt - As I recall it, (my memory may not be correct), RYM got into a position where the forward PE was early 30's. They had a more than 15 year track record of growing underlying earnings in the mid-late teens, (% per annum) to support that PE) but history shows that wasn't enough and the shares went sideways for three years.

People seem to have forgotten that there's some element of cyclicality to tourism and forgotten the early days (which weren't that long ago) when THL traded on vastly more reasonable multiples. A tripling in SP in three years has been a fantastic run and I for one am happy to take my profit.

On the other hand SUM have been growing underlying earnings faster than THL and their SP has gone nowhere in the last 18 months. THL a great company but I think one can enjoy growth, (and Rob Campbell's legendary expertise for as long as he continues working) SUM where else at a substantially more reasonable PE multiple in a sector with prevailing tailwinds for the next 20-25 years. If we're in the early stages of PE reversion towards historical norms those with the higher PE are more vulnerable in my opinion.

I simply don't feel the need to have such a diversified portfolio going forward. I will target realistic PE's, very strong growth and high dividend yield payers as my way to weather a market that may be reverting to overall PE contraction with higher interest rates.

[iceman]

Rob Campbell was looking old and quite portly at the SUM annual meeting in April 2017. I hope for shareholders sake in SUM THL and the other directorships he holds he's taking steps to manage his weight / health better. He's a legend, no question about that.

Hardt - Fair enough and all the best with it.

And he's taken on Sky City since then hasn't he ? I worry he has taken on too much. He is a great Chairman for both THL and SUM

[Beagle]

And he's taken on Sky City since then hasn't he ? I worry he has taken on too much. He is a great Chairman for both THL and SUM

Yes you know he has mate and he's probably very pleased that SKC are getting the bargain of the century with their new international convention entre for a contracted price of less than half the cost to build it ! He has plenty on his plate, (in more ways than one if you know what I mean) for someone his age, no question about that !

[winner69]

No argument its a good company with sound long term growth prospects. I wouldn't for one second try and make any case otherwise.
The point of contention as far as I am concerned is whether this is already fully built into the SP ?
The tripling in SP in the last 3 years is well ahead of earnings growth and has been predicated upon a quite considerable expansion in the PE multiple. The 50 cent jump from $5.50 to $6.00 just before Christmas was based on the tax rate change in the U.S.
The SP is fine if the growth continues at pace but this is now a more heavily geared business than it was so the risk profile has changed and any prudent investor needs to recognize that.

THL's SP performance reminds me very much of the time when RYM's SP tripled in three years leading up to 2014 to ~ $8.50 when I called it as overdone and although nobody would argue against RYM also being a fine company the fact is until very recently the SP did ostensibly nothing for the following three years simply because it got to far ahead of itself in 2014.

None of this will be any concern to young ones planning to hold this for the next decade but anyone approaching retirement can be forgiven for asking themselves is there better value and growth at a cheaper price SUM where else in a needs based business ? I made the correct call on RYM nearly 4 years ago and its SP has materially underperformed the market since then despite being a great company with solid growth and an excellent outlook.

I'm going out on a limb here and making the call that there's growth companies at a cheaper price elsewhere. I could be wrong but am happy to back my own judgment and have the stretched PE of RYM example to support my thesis. Good luck to holders and as mentioned if you're in for the very long haul I think you should do well, just keep that seat belt fastened All that said I'm overdue to get something badly wrong, maybe its this one...

I think what beagle is saying is that the thl share price could go nowhere for a year or so as it has got ahead of itself. It could do what the RYM share price did a while ago - go nowhere for a few years.

Here is chart of thl share price over the years overlayed with its EPS and a few notes re PE ratios. I only bothered with the EPS line from the time it pulled itself out of the depths of despair and lwas osing money (not that long ago was it ...never happen again will it?)

Chart no doubt tells a story ...what that story is what you want it to say but I reckon Beagle says the share price has got ahead of itself and will be about the same as it is now at the beginning of 2020...even though earnings will grow to $38m in F18 and $47m in F19 (that's what I used)

[Balance]

I think what beagle is saying is that the thl share price could go nowhere for a year or so as it has got ahead of itself. It could do what the RYM share price did a while ago - go nowhere for a few years.

Here is chart of thl share price over the years overlayed with its EPS and a few notes re PE ratios. I only bothered with the EPS line from the time it pulled itself out of the depths of despair and lwas osing money (not that long ago was it ...never happen again will it?)

Chart no doubt tells a story ...what that story is what you want it to say but I reckon Beagle says the share price has got ahead of itself and will be about the same as it is now at the beginning of 2020...even though earnings will grow to $38m in F18 and $47m in F19 (that's what I used)

Your chart is truly one of those pictures which paints ten thousand words!

[Leftfield]

Interesting news today to expand THL's digital marketing via a new JV called TH2 at a cost of $NZ 3 mill.

"THL Chairman, Mr Rob Campbell, said, “at the Annual Meetings in 2016 and 2017 we outlined our need to grow a global platform that would assist us in broadening our reach within the wider RV ecosystem. We have progressed down this path well; however, we now have a partner and set of assets that will turn our “start” into a compelling, winning global business.”
TH2 will be focused on significantly enhancing the enjoyment and safety of RV enthusiasts by digitally connecting this fast growing international marketplace. This innovative and comprehensive platform will improve every aspect of RV ownership, with capabilities that include trip planning and booking, remote systems monitoring, roadside assistance, and peer-to-peer RV and campsite rental. The system will also streamline an owner’s record keeping and enable dealers and manufacturers to provide such support as triggered service notifications, online vehicle manuals and more"