New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<h2>Tourism Holdings</h2>
FY19 Result Initial Impressions
FY19 was a tough year for Tourism Holdings’ (THL) given the challenges in the US used vehicle sales market. Nonetheless, underlying performance at the EBIT level was only -2% below the prior year, given earnings growth in New Zealand rentals, Australian rentals (despite a dealership liquidation which impacted vehicle sales in the year) and the Tourism Group. New Zealand Rentals in particular had another strong year with further yield growth.
Group NPAT was materially lower than the prior year given the significant investment being made in Togo (included as a JV), THL’s tech JV with Thor (previously called TH2). The Togo investment (NZ$12.8m) in FY19 was less than management had previously indicated.
Operating cashflow remains positive (which incorporates fleet purchases and sales) despite the US fleet sales woes, reflective of the strength of THL’s business model. THL has announced a 14c final dividend consistent with its guidance.
Outlook
THL will provide first time FY20 profit guidance at its Annual Shareholder Meeting on 23 October 2019. There has been “little change” in management’s expectations or view on each market since the capital raise in June 2019. Forward bookings for both Rentals NZ and Rentals Australia &nbsp;are up on last year. One area of caution exists around Australian fleet sales, which were down -12% in FY19.
Our view
THL’s US challenges, which have dogged FY19, will continue into FY20 reflective of the cost of carrying a larger fleet (given its inability to sell as many vehicles as it would have liked) and on-going weakness in the used vehicle market. It is addressing the issue through a number of initiatives but is reliant on better market access through RV dealerships. In contrast, its businesses in New Zealand and Australia appear in relatively good health, particularly those in NZ, which have generated further ROFE improvement. With forward bookings in Australasia up on last year and valuation levels implying flat to declining profitability we retain a positive view on THL. OUTPERFORM.
Result summary (NZ$m)
<table class="table table-striped">
<tbody>
<tr>
<td>
&nbsp;
</td>
<td>
FY18
</td>
<td>
FY19
</td>
<td>
Change
</td>
</tr>
<tr>
<td>
Profit and loss account
</td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>
Sales revenue
</td>
<td>
425.9
</td>
<td>
423.0
</td>
<td>
-1%
</td>
</tr>
<tr>
<td>
EBITDA
</td>
<td>
110.9
</td>
<td>
114.8
</td>
<td>
4%
</td>
</tr>
<tr>
<td>
Depreciation and amortisation
</td>
<td>
(47.4)
</td>
<td>
(52.6)
</td>
<td>
11%
</td>
</tr>
<tr>
<td>
NZ Rentals
</td>
<td>
25.7
</td>
<td>
31.5
</td>
<td>
23%
</td>
</tr>
<tr>
<td>
Tourism Group
</td>
<td>
11.9
</td>
<td>
12.3
</td>
<td>
3%
</td>
</tr>
<tr>
<td>
Australia Rentals
</td>
<td>
10.6
</td>
<td>
11.3
</td>
<td>
7%
</td>
</tr>
<tr>
<td>
US Rentals
</td>
<td>
19.7
</td>
<td>
13.0
</td>
<td>
-34%
</td>
</tr>
<tr>
<td>
Group support services and other
</td>
<td>
(4.4)
</td>
<td>
(6.0)
</td>
<td>
37%
</td>
</tr>
<tr>
<td>
EBIT
</td>
<td>
63.5
</td>
<td>
62.1
</td>
<td>
-2%
</td>
</tr>
<tr>
<td>
Associates
</td>
<td>
(0.8)
</td>
<td>
0.2
</td>
<td>
-131%
</td>
</tr>
<tr>
<td>
JV profits
</td>
<td>
(0.2)
</td>
<td>
(11.3)
</td>
<td>
4498%
</td>
</tr>
<tr>
<td>
Interest expense
</td>
<td>
(9.4)
</td>
<td>
(11.2)
</td>
<td>
19%
</td>
</tr>
<tr>
<td>
Profit before tax
</td>
<td>
53.1
</td>
<td>
39.9
</td>
<td>
-25%
</td>
</tr>
<tr>
<td>
Taxation (incl. abnormal tax)
</td>
<td>
(15.6)
</td>
<td>
(10.1)
</td>
<td>
-35%
</td>
</tr>
<tr>
<td>
Reported NPAT
</td>
<td>
37.5
</td>
<td>
29.8
</td>
<td>
-21%
</td>
</tr>
<tr>
<td>
Non-recurring (post tax)
</td>
<td>
24.9
</td>
<td>
(1.9)
</td>
<td>
n/a
</td>
</tr>
<tr>
<td>
Underlying NPAT
</td>
<td>
62.4
</td>
<td>
27.9
</td>
<td>
-55%
</td>
</tr>
<tr>
<td>
Underlying EPS (cents)
</td>
<td>
30.9
</td>
<td>
23.7
</td>
<td>
-23%
</td>
</tr>
<tr>
<td>
Final DPS (cents)
</td>
<td>
14.0
</td>
<td>
14.0
</td>
<td>
0%
</td>
</tr>
</tbody>
</table>
&nbsp;Source: Forsyth Barr analysis
Andy Bowley&nbsp;
Head of Research&nbsp;
<table class="table table-striped">
<tbody>
<tr>
<td>
T:&nbsp;
</td>
<td>
+64 4 495 8246
</td>
</tr>
<tr>
<td>
M:&nbsp;
</td>
<td>
+64 21 338 941
</td>
</tr>
<tr>
<td>
TF:&nbsp;
</td>
<td>
0800 367 227
</td>
</tr>
<tr>
<td>
F:&nbsp;
</td>
<td>
+64 4 495 8193
</td>
</tr>
<tr>
<td>
P:&nbsp;
</td>
<td>
PO Box: 5266, Wellington 6145
</td>
</tr>
<tr>
<td>
&nbsp;
</td>
<td>
&nbsp;
</td>
</tr>
<tr>
<td>
W:&nbsp;
</td>
<td>
<a href="http://www.forsythbarr.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz&amp;source=gmail&amp;ust=1566947110604000&amp;usg=AFQjCNGHAyNjYwyWro1bDu0yj4EBQy-7Ag" rel="noopener">www.forsythbarr.co.nz</a>
</td>
</tr>
<tr>
<td>Twitter:</td>
<td>
<a href="http://twitter.com/forsythbarr" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://twitter.com/forsythbarr&amp;source=gmail&amp;ust=1566947110604000&amp;usg=AFQjCNEvkpkpAXWZnruKsDzN2zsQ6gIimw" rel="noopener">@forsythbarr</a>
</td>
</tr>
</tbody>
</table>

Tourism Holdings
FY19 Result Initial Impressions
FY19 was a tough year for Tourism Holdings’ (THL) given the challenges in the US used vehicle sales market. Nonetheless, underlying performance at the EBIT level was only -2% below the prior year, given earnings growth in New Zealand rentals, Australian rentals (despite a dealership liquidation which impacted vehicle sales in the year) and the Tourism Group. New Zealand Rentals in particular had another strong year with further yield growth.
Group NPAT was materially lower than the prior year given the significant investment being made in Togo (included as a JV), THL’s tech JV with Thor (previously called TH2). The Togo investment (NZ$12.8m) in FY19 was less than management had previously indicated.
Operating cashflow remains positive (which incorporates fleet purchases and sales) despite the US fleet sales woes, reflective of the strength of THL’s business model. THL has announced a 14c final dividend consistent with its guidance.
Outlook
THL will provide first time FY20 profit guidance at its Annual Shareholder Meeting on 23 October 2019. There has been “little change” in management’s expectations or view on each market since the capital raise in June 2019. Forward bookings for both Rentals NZ and Rentals Australia &nbsp;are up on last year. One area of caution exists around Australian fleet sales, which were down -12% in FY19.
Our view
THL’s US challenges, which have dogged FY19, will continue into FY20 reflective of the cost of carrying a larger fleet (given its inability to sell as many vehicles as it would have liked) and on-going weakness in the used vehicle market. It is addressing the issue through a number of initiatives but is reliant on better market access through RV dealerships. In contrast, its businesses in New Zealand and Australia appear in relatively good health, particularly those in NZ, which have generated further ROFE improvement. With forward bookings in Australasia up on last year and valuation levels implying flat to declining profitability we retain a positive view on THL. OUTPERFORM.
Result summary (NZ$m)




&nbsp;


FY18


FY19


Change




Profit and loss account







Sales revenue


425.9


423.0


-1%




EBITDA


110.9


114.8


4%




Depreciation and amortisation


(47.4)


(52.6)


11%




NZ Rentals


25.7


31.5


23%




Tourism Group


11.9


12.3


3%




Australia Rentals


10.6


11.3


7%




US Rentals


19.7


13.0


-34%




Group support services and other


(4.4)


(6.0)


37%




EBIT


63.5


62.1


-2%




Associates


(0.8)


0.2


-131%




JV profits


(0.2)


(11.3)


4498%




Interest expense


(9.4)


(11.2)


19%




Profit before tax


53.1


39.9


-25%




Taxation (incl. abnormal tax)


(15.6)


(10.1)


-35%




Reported NPAT


37.5


29.8


-21%




Non-recurring (post tax)


24.9


(1.9)


n/a




Underlying NPAT


62.4


27.9


-55%




Underlying EPS (cents)


30.9


23.7


-23%




Final DPS (cents)


14.0


14.0


0%




&nbsp;Source: Forsyth Barr analysis
Andy Bowley&nbsp;
Head of Research&nbsp;




T:&nbsp;


+64 4 495 8246




M:&nbsp;


+64 21 338 941




TF:&nbsp;


0800 367 227




F:&nbsp;


+64 4 495 8193




P:&nbsp;


PO Box: 5266, Wellington 6145




&nbsp;


&nbsp;




W:&nbsp;


www.forsythbarr.co.nz



Twitter:

@forsythbarr





Tourism Holdings: FY19 Result Initial Impressions

Global Special Situations & Strategy, SR Services Ltd

David Lepper

Global Special Situations & Strategy

SR Services Ltd

SR Services provides Strategic Knowledge and Solutions services for Family Offices and Corporate Business. 

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<h2>Our Independent Lemonade stand approach</h2>In 1973, Bob Jamison introduced his business simulation game in which choices are made by a player regarding prices, advertising, etc. to determine the success or failure of the enterprise. The game owed its success not just to the Apple II release providing the game, but by offering just enough variables to make the game a complex challenge for users, whilst providing them with a simple grasp on what makes a business succeed or fail.Fundamental Small-Mid Cap Company Research, in its simplicity, is about assessing the merits of each variable depending on the market and its environment, no matter whether the company is publicly listed or held privately.The aim of this note is to lay in simple terms, our approach to researching the Small-Mid Cap Space and identifying the best ideas. In this context, this note allows the user of our product to understand the following:<ul><li>How we are different to other mainstream offerings,</li><li>How we filter our focus universe,</li><li>What’s our approach to best idea selection <ol><li>Balancing risk and reward </li><li>Accommodating Sector Rotation </li><li>Fundamental components of our commentary</li></ol></li><li>What you won’t get from us.</li><li>How you can interact with us.</li><li>What we hope to receive from you.</li></ul>Along, the way, we hope to highlight some clear truths, dismiss some myths about the Small-Mid Cap Company space, and also provide a clear outline of the mechanisms of the successful Lemonade Stand and the not-so-successful stands.In the meantime, pull out a bottle of your favourite ‘Lemonade’ and join us on our journey. We look forward to hearing from you!

Our Independent Lemonade stand approachIn 1973, Bob Jamison introduced his business simulation game in which choices are made by a player regarding prices, advertising, etc. to determine the success or failure of the enterprise. The game owed its success not just to the Apple II release providing the game, but by offering just enough variables to make the game a complex challenge for users, whilst providing them with a simple grasp on what makes a business succeed or fail.Fundamental Small-Mid Cap Company Research, in its simplicity, is about assessing the merits of each variable depending on the market and its environment, no matter whether the company is publicly listed or held privately.The aim of this note is to lay in simple terms, our approach to researching the Small-Mid Cap Space and identifying the best ideas. In this context, this note allows the user of our product to understand the following:How we are different to other mainstream offerings,How we filter our focus universe,What’s our approach to best idea selection Balancing risk and reward Accommodating Sector Rotation Fundamental components of our commentaryWhat you won’t get from us.How you can interact with us.What we hope to receive from you.Along, the way, we hope to highlight some clear truths, dismiss some myths about the Small-Mid Cap Company space, and also provide a clear outline of the mechanisms of the successful Lemonade Stand and the not-so-successful stands.In the meantime, pull out a bottle of your favourite ‘Lemonade’ and join us on our journey. We look forward to hearing from you!

Notes from the Silk Road: Setting Out Our Small-Mid Cap Lemonade Stand

New Zealand

Tourism Holdings Limited provides tourist services in New Zealand and Australia. The Company's services include campervan and motor homes, car rentals and coach services.  The Company also offers sightseeing tours, Antarctic tourist centers, boating tours and cave expeditions.

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Tourism Holdings (THL NZ)

Tourism Holdings: FY19 Result Initial Impressions

Tourism Holdings FY19 Result Initial Impressions FY19 was a tough year for Tourism Holdings’ (THL) given the challenges in the US used vehicle...

Forsyth Barr

Notes from the Silk Road: Setting Out Our Small-Mid Cap Lemonade Stand

Our Independent Lemonade stand approachIn 1973, Bob Jamison introduced his business simulation game in which choices are made by a player regarding...

David Lepper

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