THL - Tourism Holdings

[winner69]

...........but thl entering their busy period so lets hope those tourist numbers keep getting better and thl can improve that return on capital , ive got some spare time soon so il post some indepth analysis on thl for anyone interested.

Always interested in your analysis bull .... esp if you have changed your views in the last week

THL seems to defy fundamental analysis .... in bad times they loss money and in good times they also stuff up .... something inherently wrong with their business model I fear

A few years ago I found that their profits were negatively correlated with tourist numbers .... increasing tourist numbers and THL made less and so on. Haven't keep that chart up to date but might update it some some time to see whether the picture has changed

Now what did those rogue Aussies think THL was worth a few years ago ..... shareholders should have taken it up and been put out of their misery

[bull....]

Hi Winner ,no spare time yet.
Im still in for RWC year 2011 - 2012 with a long term holding and ill trade the stock as well. ( Time will tell if it is an earnings outlier year ).
A smart person would have made that last announcement a worst case outcome so no more downgrade a forth coming .. time will tell ,
Like you mention about their model it probably not broken just needs to be tweaked for the new environment , I would like to see less reliance on soley campervans ( 1 product) for earnings and a second big earnings stream built ( waitomo cave type attractions in NZ ? , Bus tours ? ) more added value in these things.
If capital spend is reduced for a year theirs a lot of spare cash to use for aquisitions to expand the earnings stream.

[bull....]

http://www.nzherald.co.nz/business/n...ectid=10683536

This is why I would like to see THL develop that second revenue stream , transform itself into the dominant tourism company in NZ.

[bull....]

Attachment 3006
testing picture

[bull....]

Ive played around for ages trying to post tables in here with no luck so posted a picture of the tables so hope you can see it , anyway I did some analysis and
As can be seen from the total table the return has been heading south since 2005 high of 11% down to our current 4% as at 2010 even though more money has been invested in the business and turnover has increased. As some posters are aware the company seems to be losing money each year for shareholders on the funds they have invested.
Whets happened over this period – Well 2005 / 2006 didn’t look to bad to me but things started to change in 2007 when they undertook a major strategy review and created 4 separate operating divisions these were Rentals, Tourism Leisure Group which incorporated Attractions and Coaches, Ex Group to focus on the youth market and Ci Munro for Manufacturing. This may have been a good strategy except for the fact In 2008 the world went south and so did this strategy with the group selling off the bulk of the attractions and the coach businesses, as the tables show selling of these businesses made little difference to our return on capital benchmark anyway. In fact it was probably the right strategy for the time as they would probably had to borrow money to upgrade the attraction businesses etc this increasing debt at a time of uncertain revenue instead they used the money to repay debt .
2009 was a year off consolidation and currently the business seems to have stabilised and they intend to focus on Rental side off the business to achieve the return on capital.
How are they going to achieve this when every year on trend shows a decline?
Well looking at our tables makes you wonder since the rentals is the core business and even though turnover and funds deployed have both increased our EBIT is being punished of late and this is the big factor in the Return on Funds figure being so low. A quick figure suggests the rentals side of the business need to produce 20mil more on ebit on current funds employed to get back to trend on the overall total return on funds.
A quick look at the Income Statement shows Cost of Sales has ballooned so I guess the answer lies in their somewhere as to why Rentals are being punished and our Return on Funds.
Got to run very busy week as far as markets go so need to do my homework ill post some more soon on what I think , if others have ideas please share theirs an annual general meeting coming up.

[Sauce]

Hi Bull

I thoroughly enjoyed reading your analysis of THL.

My thoughts are this; Why not look for a business with better economics?

If you believe THL returns are stable, and assuming they don't decide (or need) to retain more profits in the future, then a price to book of about 0.35 - 0.38 seems about right - at this price point (about 65-70cps) the returns might arguably be worthwhile considering the risks - but with basically no margin of safety whatsoever.

I couldn't help but chuckle at the following comments from the chairman in the annual report

I am pleased to report that thl’s balance sheet remains strong, with
net debt levels down from $58m to $37m at year-end, providing an
equity ratio of 62% and a debt-to-debt-plus-equity ratio of 21%. It
is also a competitive advantage that differentiates thl from other
operators and thus stands the company in good stead.
Throughout poor economic cycles thl has proven that the business
model can adapt and provide security to shareholders through
effective capital management.

I wonder if the chairman has been smoking something usually passed around in THL's camper vans :0

Just kidding (sort of!).. but I do think there are businesses with better economics providing much more obvious value on NZX right now. As an exercise it's been fun to take a look at THL, and to read your post and analysis Bull. Thanks for posting it here.

I would love to know if, and where, you see value in owning THL.

Regards,

Sauce

[bull....]

Hi Bull

I thoroughly enjoyed reading your analysis of THL.

My thoughts are this; Why not look for a business with better economics?

If you believe THL returns are stable, and assuming they don't decide (or need) to retain more profits in the future, then a price to book of about 0.35 - 0.38 seems about right - at this price point (about 65-70cps) the returns might arguably be worthwhile considering the risks - but with basically no margin of safety whatsoever.

I couldn't help but chuckle at the following comments from the chairman in the annual report

I am pleased to report that thl’s balance sheet remains strong, with
net debt levels down from $58m to $37m at year-end, providing an
equity ratio of 62% and a debt-to-debt-plus-equity ratio of 21%. It
is also a competitive advantage that differentiates thl from other
operators and thus stands the company in good stead.
Throughout poor economic cycles thl has proven that the business
model can adapt and provide security to shareholders through
effective capital management.

I wonder if the chairman has been smoking something usually passed around in THL's camper vans :0

Just kidding (sort of!).. but I do think there are businesses with better economics providing much more obvious value on NZX right now. As an exercise it's been fun to take a look at THL, and to read your post and analysis Bull. Thanks for posting it here.

I would love to know if, and where, you see value in owning THL.

Regards,

Sauce

Hi Sauce
Your not alone in wondering why anyone would wont to invest in THL , I hope after ive posted more of analysis aand reasoning your see where I am coming from and not consider me totally mad.

[Gonzo]

I had some of these a few years ago but I drive up and down the Invercargill - Bluff road a bit & when I saw all the old 2nd hand ex Britz and Maui vans rebranded as Kea etc etc, I decided there is no economic 'moat' around this co. and gave it away

[bull....]

Hi Gonzo,
You bring up a very valid point about those old 2nd hand vans because I was thinking it may be contributing to the high repairs and maintenance bill they have

[Sauce]

Hi Sauce
Your not alone in wondering why anyone would wont to invest in THL , I hope after ive posted more of analysis aand reasoning your see where I am coming from and not consider me totally mad.

I am really looking forward to it Bull! A fun excercise indeed...
Cheers
Sauce