THL - Tourism Holdings

[JeremyALD]

Good deal Jeremy? .... haven't heard from you for a while

Hello hello!

I've been out of THL and ATL for a while, but a merged entity does sound like an appealing proposition, especially as a long term investment.

Last I heard ATL was still carrying quite a lot of debt, so I will need to look more closely at the financials to see if this was a good deal.

What are everyone's thoughts about approvals, especially Commerce Commission? Seems like THL will almost control the NZ market with the merger?

[Muse]

Some of my back of the envelop workings I did looking at the implications from the proposed merger which I did in haste prior to trading commencing again after the announcement. Defo not advice, as a spreedsheet only as good as its inputs, and I used the relevant synergy information from the THL (being 18m in operating synergies flowing through to EBIT, a one off 40m reduction in net debt, and ~4m of after tax costs associated with the fleet rationalisation. Didn't include the $30m further upside rationalisation as alluded to in the report.) Did two scenarios - looking at the phasing THL suggested, and then just one simple one assuming all synergies finalised in about 3.5 years from right now. 7.5x EBIT multiple applied to incremental operating synergies, and a 15% discount rate (which is high, to reflect relative risk on delivering those synergies).

Attachment 13322

It's interesting - the theoretical ex price from the merger is about 2.75 (the summed marketcaps prior to the announcement divided by the # of THL shares post merger). Then added the NPV of synergies and fleet rationalisation.

Gets you to about 3.27 (if you ignore the phased delivery of synergies) to about 3.34 if you try to reflect the timing of them as management have guided.

Not a definitive analysis and all the risks on actual ability to delivery those synergies (I actually see this one where its quite possible) hence the high discount rate. Gave me the confidence to buy almost every share once trading commenced from about 2.80 to 2.88, bar the odd parcel.
again do your own research. a lot of theoretical upside but, ya know, a massive ongoing pandemic, borders opening and shutting, new variants, changing government attitudes, no one knows what the new normal is like.

[winner69]

Hi Moose, I did much the same exercise

Whether to get involved or note was decided when I saw the Proforma P&L in the presentation which showed the merged out losing $43.6m in F21

thl already signaled F22 probably doing to be worse ... wouldn't hang any hopes of Apollo doing any better (still losing)

Marketsceener has things getting better for both (post covid recovery) with combined profits of $27m in F23 and $50m in F24 ...and analysts are always otimistic eh

Even adding in the synergies and he other benefits I really could't convince myself to buy at say $3 - ie $600m market cap. Still losing in F22 and so much uncertainty about the next few years that seems awfully high. I reckon more things can go wrong than the good things becoming reality.

Will be watching closely though - sometime a surer bet but not just now for me

You might be right ... well done if you are

[Muse]

Hi Moose, I did much the same exercise

Whether to get involved or note was decided when I saw the Proforma P&L in the presentation which showed the merged out losing $43.6m in F21

thl already signaled F22 probably doing to be worse ... wouldn't hang any hopes of Apollo doing any better (still losing)

Marketsceener has things getting better for both (post covid recovery) with combined profits of $27m in F23 and $50m in F24 ...and analysts are always otimistic eh

Even adding in the synergies and he other benefits I really could't convince myself to buy at say $3 - ie $600m market cap. Still losing in F22 and so much uncertainty about the next few years that seems awfully high. I reckon more things can go wrong than the good things becoming reality.

Will be watching closely though - sometime a surer bet but not just now for me

You might be right ... well done if you are

I hear ya on all that. Hence only 1% of the portfolio (@~2.85) and expect to buckle up for a long bumpy ride!

The other thing I noticed was what it does to proforma NTA per share. Different business models on vehicle ownership. NTA trackers wont like and take some time for the market to readjust (or not). But I like the look of the merger (acquisition really), if its allowed to happen. The status quo didnt interest me.

[Scrunch]

I hear ya on all that. Hence only 1% of the portfolio (@~2.85) and expect to buckle up for a long bumpy ride!

The other thing I noticed was what it does to proforma NTA per share. Different business models on vehicle ownership. NTA trackers wont like and take some time for the market to readjust (or not). But I like the look of the merger (acquisition really), if its allowed to happen. The status quo didnt interest me.

I haven't gone onto the deal in depth, but a basic look has it seeming like a repeat of the kea merger - in broad terms. That worked out well and also means THL have more experience than usual around whst synergy gains are real vs just on paper.

[winner69]

I hear ya on all that. Hence only 1% of the portfolio (@~2.85) and expect to buckle up for a long bumpy ride!

The other thing I noticed was what it does to proforma NTA per share. Different business models on vehicle ownership. NTA trackers wont like and take some time for the market to readjust (or not). But I like the look of the merger (acquisition really), if its allowed to happen. The status quo didnt interest me.

Share price went from about 60 cents in 2013 to just under $7 in June 2018

Been downhill since then .... and was in free fall even before covid hit

Might do a stellar rise again

[flyinglizard]

Sold today...........

[golden city]

I was leading the way on last 60c buying. Sold out 2018. I didn’t feel right to get back in yet

[Beagle]

Hi Moose, I did much the same exercise

Whether to get involved or note was decided when I saw the Proforma P&L in the presentation which showed the merged out losing $43.6m in F21

thl already signaled F22 probably doing to be worse ... wouldn't hang any hopes of Apollo doing any better (still losing)

Marketsceener has things getting better for both (post covid recovery) with combined profits of $27m in F23 and $50m in F24 ...and analysts are always otimistic eh

Even adding in the synergies and he other benefits I really could't convince myself to buy at say $3 - ie $600m market cap. Still losing in F22 and so much uncertainty about the next few years that seems awfully high. I reckon more things can go wrong than the good things becoming reality.

Will be watching closely though - sometime a surer bet but not just now for me

You might be right ... well done if you are

Good post, I agree.

[winner69]

Looked through all the guff re the merger again

Not exactly a growth story is it

Seems all about ensuring two struggling companies might one day have a future ....and a fair of that future I feel is already built into the current market cap of $600m if the deal completes - but I fear that day is a long way off