THL - Tourism Holdings

[Balance]

consolidation is almost over.., soon will see THL breakout again

$1.20 so it is breakout time?

[forest]

THL - Market Update
8:35am, 2 Jul 2014 | FORECAST
2 July 2014

NZX Market Release

Tourism Holdings Limited (THL)
Market Update
With the financial year at an end, thl can advise that based on a review of the non-audited FY14 financial results, thl’s Net Profit After Tax will meet or exceed the forecast which was released to the market in February 2014.

Net Debt will be below $90M compared with the $95M forecast in February.

Early forecasts are being completed for the FY15 year and will be discussed in more detail with the Annual Results announcement on August 26th, 2014.

At this point in time we are confident of achieving further growth in FY15 and delivering the key objectives set at the 2013 Annual Meeting. Those objectives included achieving an appropriate rate of return on funds employed in the Australian and New Zealand rentals businesses.

No further indications or details can be provided at this point in time until the full accounts are completed and audited.

Authorised by:

Rob Campbell
Chairman
Tourism Holdings Limited

In round numbers the NZ and AUS rentals had a total assets of 240mil at 31-12-13. Would it be to optimistic to expect a 10% return on this say 24mil. Take off this 7mil interest cost and there would be 17mil profit left on just the NZ and AUS rentals alone. I know this is a very simplistic way of looking at the financials but it illustrate that things are on the up as far as I see them.
What do others think?

[noodles]

Great question forest. In the US, THL is returning 20% on funds employed.

Also I expect interest cost to be much lower next year as debt is much lower. Maybe $5mill

noodles

[winner69]

Round numbers currently thl have $250m invested in the business (equity $160m plus debt $90m)

Forecast EBIt is $21m - probably a bit higher now so lets say $23m.

After tax operating profit therefore about $16m(their tax a bit complicated so used 30%)

So return on invested capital is 6% odd .....not covering their cost of capital (PWC say this is 10.5%)

But obviously improving performance - more profit / less debt (ie less invested capital)

So first target should be ROIC of at least 10% - say 2015 debt gets further reduced by increase in retained earnings so capital stays at $250m this needs EBIT of around $35m

They seem intent on achieving this soon ...the 2015 forecast will be interesting.


The market has yet to price in such performance - the past baggage thl has still hanging around

[J R Ewing]

It's certainly an improving performance. One potential problem I see is that while debt may be reducing the average age of the fleet might be increasing. That could mean taking on more debt or raising more equity in order to bring the fleet back up to the required standard at some point in the future.

[Balance]

It's certainly an improving performance. One potential problem I see is that while debt may be reducing the average age of the fleet might be increasing. That could mean taking on more debt or raising more equity in order to bring the fleet back up to the required standard at some point in the future.

That has always been THL's problem - replacing its aging fleet.

Not sure what the answer is but selling in bulk into the second hand market was a dumb idea which cost the company plenty in the past - many were bought and then, rented out in competition!

[Beagle]

Gents, we all know this has historically been a very cyclical company so while Rob Campbell is inferring a stronger 2015, so is AIR.
Might be a bit early to be calling for consistent growth, does a cyclical company, (leopard), really change its spots ?

[forest]

Gents, we all know this has historically been a very cyclical company so while Rob Campbell is inferring a stronger 2015, so is AIR.
Might be a bit early to be calling for consistent growth, does a cyclical company, (leopard), really change its spots ?

I think Rob Campbell is suggesting quite a sizeable upturn, how sizeable I am trying to work out, but to me it seems that it is worth the time to look into.

[Beagle]

I think Rob Campbell is suggesting quite a sizeable upturn, how sizeable I am trying to work out, but to me it seems that it is worth the time to look into.

How do the companies compare on a 2014 PE basis if we assume AIR makes $240m after tax = 21.6 eps for a PE of 9.9 times at latest price of $2.14
THL $10.5m / 111.8m shares = EPS of 9.392 cps = 2014 PE of 12.45...albeit with the Chairman saying they're likely to beat previous guidance.

Given there's questions about how THL keep their fleet modern, whereas on the other hand AIR has well articulated plans for a fleet modernisation programme should THL really be trading at a higher relative PE given its lower liquidity ? I guess it all depends on how much people think AIR and THL respectively will grow their 2015 and beyond earnings.

For my money I think Air have the more definitive strategy and superior previous record.

[winner69]

Can I pick your brains mate. How do the companies compare on a 2014 PE basis if we assume AIR makes $240m after tax = 21.6 eps for a PE of 9.9 times at latest price of $2.14 ?

Guidance was NPAT $10.5m ...doing better so say $12m

PE at shareprice 117 then 11.1

About what AIR was a few weeks ago