New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Tourism Holdings (THL) 1H21 Result Initial Thoughts</h2>
Tourism Holdings (THL) reported a soft 1H21 result, broadly in line with our estimates, reflecting the significant demand changes that have impacted over the period. While US profitability held up at prior year levels, given solid domestic rental demand and a substantial improvement in vehicle sales, the contributions from New Zealand and Australia fell materially. THL received NZ$6.6m of government support in 1H21 across NZ, Australia and the US.
While losses will feature for the foreseeable future, the balance sheet is strong helped by the relatively liquid nature of its fleet. Net debt of just NZ$22m at period end fell NZ$106m during 1H21 due to the significant lift in vehicle sales (1,786 vs 944 in 1H20). In contrast rental revenue declined -54%. Given the seasonality of the business, we expect rental revenues to fall at a greater rate through 2H21, assuming borders remain closed.
NAV has fallen to NZ$2.10 from NZ$2.20 at year end FY20. We expect NAV dilution to accelerate through 2H21 given the likely larger losses that loom.
Outlook
No change to late December guidance commentary for FY21. Losses are likely to deepen in 2H21 given the &nbsp;seasonally slower demand environment in the US and the need to preserve fleet numbers for a recovery.
FY22 management comments: “As it stands today, we believe that a reasonable quantum of international leisure travel is unlikely. Our expectations of performance in a fully domestic environment within each of our regions remain unchanged.“
Acquisition of remaining 50% in Action
In a separate announcement THL advised that it will acquire the remaining 50% in Action Manufacturing from JV partner Grant Brady for NZ$9m through a combination of shares (NZ$7.5m at NZ$2.30 per share) and cash (NZ$1.5m). Action Manufacturing is a key part of THL’s build-buy, rent, sell model in New Zealand and Australia, and provides some diversification benefits outside of RVs. The represents a sensible acquisition at a very good price. Over the past four years THL’s share of Action’s NPAT has ranged from NZ$1.4m-NZ$3.1m, implying a historic PE multiple of 3x-6x. &nbsp;&nbsp;
Conference call
THL will host a result conference call at midday. Pre-registration at&nbsp;<a href="http://apac.directeventreg.com/registration/event/8897336" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://apac.directeventreg.com/registration/event/8897336&amp;source=gmail&amp;ust=1614384092696000&amp;usg=AFQjCNF71c2y9MilQxiGhyum-NkZVbkoPw" rel="noopener">http://apac.directeventreg.com/registration/event/8897336</a>
Result summary (NZ$m)
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 72.45pt;">
&nbsp;
</td>
<td style="width: 42.8pt;">
1H20
</td>
<td style="width: 42.8pt;">
1H21
</td>
<td style="width: 42.8pt;">
Change
</td>
<td style="width: 42.8pt;">
Forbar
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
Sales revenue
</td>
<td style="width: 42.8pt;">
207.5
</td>
<td style="width: 42.8pt;">
205.8
</td>
<td style="width: 42.8pt;">
-1%
</td>
<td style="width: 42.8pt;">
207.2
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
EBITDA
</td>
<td style="width: 42.8pt;">
62.1
</td>
<td style="width: 42.8pt;">
25.7
</td>
<td style="width: 42.8pt;">
-59%
</td>
<td style="width: 42.8pt;">
28.5
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
EBIT
</td>
<td style="width: 42.8pt;">
31.0
</td>
<td style="width: 42.8pt;">
0.2
</td>
<td style="width: 42.8pt;">
-99%
</td>
<td style="width: 42.8pt;">
(3.7)
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
Reported NPAT
</td>
<td style="width: 42.8pt;">
13.1
</td>
<td style="width: 42.8pt;">
(1.8)
</td>
<td style="width: 42.8pt;">
-114%
</td>
<td style="width: 42.8pt;">
(4.0)
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
Underlying NPAT
</td>
<td style="width: 42.8pt;">
13.1
</td>
<td style="width: 42.8pt;">
(3.0)
</td>
<td style="width: 42.8pt;">
-123%
</td>
<td style="width: 42.8pt;">
(4.0)
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
Underlying EPS (cents)
</td>
<td style="width: 42.8pt;">
8.9
</td>
<td style="width: 42.8pt;">
(2.0)
</td>
<td style="width: 42.8pt;">
-123%
</td>
<td style="width: 42.8pt;">
(2.7)
</td>
</tr>
<tr>
<td style="width: 72.45pt;">
Interim DPS (cents)
</td>
<td style="width: 42.8pt;">
0.0
</td>
<td style="width: 42.8pt;">
0.0
</td>
<td style="width: 42.8pt;">
n/a
</td>
<td style="width: 42.8pt;">
0.0
</td>
</tr>
</tbody>
</table>
&nbsp;
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 72.1pt;">
&nbsp;
</td>
<td style="width: 42.8pt;">
1H20
</td>
<td style="width: 42.8pt;">
1H21
</td>
<td style="width: 42.8pt;">
Change
</td>
<td style="width: 42.8pt;">
Forbar
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Rentals NZ
</td>
<td style="width: 42.8pt;">
7.5
</td>
<td style="width: 42.8pt;">
(10.8)
</td>
<td style="width: 42.8pt;">
-244.2%
</td>
<td style="width: 42.8pt;">
(10.3)
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Tourism Group
</td>
<td style="width: 42.8pt;">
4.3
</td>
<td style="width: 42.8pt;">
(0.5)
</td>
<td style="width: 42.8pt;">
-111.6%
</td>
<td style="width: 42.8pt;">
(1.0)
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Rentals Australia
</td>
<td style="width: 42.8pt;">
8.6
</td>
<td style="width: 42.8pt;">
(2.6)
</td>
<td style="width: 42.8pt;">
-130.2%
</td>
<td style="width: 42.8pt;">
0.4
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Rentals US
</td>
<td style="width: 42.8pt;">
12.4
</td>
<td style="width: 42.8pt;">
16.6
</td>
<td style="width: 42.8pt;">
34.0%
</td>
<td style="width: 42.8pt;">
9.1
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Group support services
</td>
<td style="width: 42.8pt;">
(1.8)
</td>
<td style="width: 42.8pt;">
(2.4)
</td>
<td style="width: 42.8pt;">
33.3%
</td>
<td style="width: 42.8pt;">
(1.8)
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
Total EBIT
</td>
<td style="width: 42.8pt;">
31.0
</td>
<td style="width: 42.8pt;">
0.2
</td>
<td style="width: 42.8pt;">
-99.4%
</td>
<td style="width: 42.8pt;">
(3.7)
</td>
</tr>
<tr>
<td style="width: 72.1pt;">
..including gain on sale
</td>
<td style="width: 42.8pt;">
7.8
</td>
<td style="width: 42.8pt;">
20.1
</td>
<td style="width: 42.8pt;">
157.7%
</td>
<td style="width: 42.8pt;">
7.8
</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis
Andy Bowley&nbsp; Head of Research
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1692700645419911668&amp;th=177dae44c95409f4&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8WlmIlz9woCuD-47bSe2af38QM3iOWhqGKinMPkFCLhZsc0OUYW77dXfs24kiURlKSg9W9NzGQ4sRWVpUEl03J9q_UsvL-p_7x6fmGLUGCn-rxqihmA4o2z_Y&amp;disp=emb" class="editor-image img-responsive"></figure>
 M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Tourism Holdings (THL) 1H21 Result Initial Thoughts
Tourism Holdings (THL) reported a soft 1H21 result, broadly in line with our estimates, reflecting the significant demand changes that have impacted over the period. While US profitability held up at prior year levels, given solid domestic rental demand and a substantial improvement in vehicle sales, the contributions from New Zealand and Australia fell materially. THL received NZ$6.6m of government support in 1H21 across NZ, Australia and the US.
While losses will feature for the foreseeable future, the balance sheet is strong helped by the relatively liquid nature of its fleet. Net debt of just NZ$22m at period end fell NZ$106m during 1H21 due to the significant lift in vehicle sales (1,786 vs 944 in 1H20). In contrast rental revenue declined -54%. Given the seasonality of the business, we expect rental revenues to fall at a greater rate through 2H21, assuming borders remain closed.
NAV has fallen to NZ$2.10 from NZ$2.20 at year end FY20. We expect NAV dilution to accelerate through 2H21 given the likely larger losses that loom.
Outlook
No change to late December guidance commentary for FY21. Losses are likely to deepen in 2H21 given the &nbsp;seasonally slower demand environment in the US and the need to preserve fleet numbers for a recovery.
FY22 management comments: “As it stands today, we believe that a reasonable quantum of international leisure travel is unlikely. Our expectations of performance in a fully domestic environment within each of our regions remain unchanged.“
Acquisition of remaining 50% in Action
In a separate announcement THL advised that it will acquire the remaining 50% in Action Manufacturing from JV partner Grant Brady for NZ$9m through a combination of shares (NZ$7.5m at NZ$2.30 per share) and cash (NZ$1.5m). Action Manufacturing is a key part of THL’s build-buy, rent, sell model in New Zealand and Australia, and provides some diversification benefits outside of RVs. The represents a sensible acquisition at a very good price. Over the past four years THL’s share of Action’s NPAT has ranged from NZ$1.4m-NZ$3.1m, implying a historic PE multiple of 3x-6x. &nbsp;&nbsp;
Conference call
THL will host a result conference call at midday. Pre-registration at&nbsp;http://apac.directeventreg.com/registration/event/8897336
Result summary (NZ$m)




&nbsp;


1H20


1H21


Change


Forbar




Sales revenue


207.5


205.8


-1%


207.2




EBITDA


62.1


25.7


-59%


28.5




EBIT


31.0


0.2


-99%


(3.7)




Reported NPAT


13.1


(1.8)


-114%


(4.0)




Underlying NPAT


13.1


(3.0)


-123%


(4.0)




Underlying EPS (cents)


8.9


(2.0)


-123%


(2.7)




Interim DPS (cents)


0.0


0.0


n/a


0.0




&nbsp;




&nbsp;


1H20


1H21


Change


Forbar




Rentals NZ


7.5


(10.8)


-244.2%


(10.3)




Tourism Group


4.3


(0.5)


-111.6%


(1.0)




Rentals Australia


8.6


(2.6)


-130.2%


0.4




Rentals US


12.4


16.6


34.0%


9.1




Group support services


(1.8)


(2.4)


33.3%


(1.8)




Total EBIT


31.0


0.2


-99.4%


(3.7)




..including gain on sale


7.8


20.1


157.7%


7.8




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

 M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Tourism Holdings (THL): 1H21 Result Initial Thoughts