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</h2>
Togo'ing
UNDERPERFORM
Tourism Holdings (THL) has structured a staged exit from its tech JV Togo; it should at least take out of the JV what it it put in. The deal values Togo at US$100m, modestly but not materially above book value, and compares to inception value of US$94m. While the blue sky option value for Togo now disappears, THL protects itself from further near term cash calls, in a period when balance sheet preservation is critical. While THL now trades at a meaningful discount to its net tangible asset value, we believe this is appropriate given significant demand uncertainty, and consequently, (1) the potential for operating losses as a result of inbound tourism markets being shut by border closures, and (2) vehicle sales markets being impacted by recessionary conditions. We retain an UNDERPERFORM rating.&nbsp;
<table class="table table-striped"><colgroup><col> <col> <col> <col> <col> <col> <col span="2"> <col span="2"> <col> <col></colgroup>
<tbody>
<tr>
<td style="width: 48pt;">NZX Code</td>
<td style="width: 48pt;">THL</td>
<td style="width: 48pt;">Financials:Jun/</td>
<td style="width: 40.2pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 43.2pt;">21E</td>
<td style="width: 48pt;">22E</td>
<td style="width: 48pt;">Valuation (x)</td>
<td style="width: 42.6pt;">19A</td>
<td style="width: 42.6pt;">20E</td>
<td style="width: 48pt;">21E</td>
<td style="width: 42.6pt;">22E</td>
</tr>
<tr>
<td style="width: 48pt;">Share price</td>
<td style="width: 48pt;">NZ$1.00</td>
<td style="width: 48pt;">NPAT* (NZ$m)</td>
<td style="text-align: left; width: 40.2pt;">27.9&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">9.7</td>
<td style="text-align: left; width: 43.2pt;">-14.8&nbsp;</td>
<td style="text-align: left; width: 48pt;">44.2&nbsp;</td>
<td style="width: 48pt;">EV/EBITDA</td>
<td style="text-align: left; width: 42.6pt;">3.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">3.2</td>
<td style="text-align: left; width: 48pt;">5.7&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">2.1&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Target price</td>
<td style="width: 48pt;">NZ$1.50</td>
<td style="width: 48pt;">EPS* (NZc)</td>
<td style="text-align: left; width: 40.2pt;">22.2&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">6.5&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">-9.7&nbsp;</td>
<td style="text-align: left; width: 48pt;">28.7&nbsp;</td>
<td style="width: 48pt;">EV/EBIT</td>
<td style="text-align: left; width: 42.6pt;">5.5&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">8.9&nbsp;</td>
<td style="text-align: left; width: 48pt;">n/a</td>
<td style="text-align: left; width: 42.6pt;">3.9&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Risk rating</td>
<td style="width: 48pt;">High</td>
<td style="width: 48pt;">EPS growth* (%)</td>
<td style="text-align: left; width: 40.2pt;">-28.3</td>
<td style="text-align: left; width: 42.6pt;">-70.4</td>
<td style="text-align: left; width: 43.2pt;">n/a</td>
<td style="text-align: left; width: 48pt;">n/a</td>
<td style="width: 48pt;">PE</td>
<td style="text-align: left; width: 42.6pt;">4.5&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">15.3&nbsp;</td>
<td style="text-align: left; width: 48pt;">n/a</td>
<td style="text-align: left; width: 42.6pt;">3.5&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Issued shares</td>
<td style="width: 48pt;">147.1m</td>
<td style="width: 48pt;">DPS (NZc)</td>
<td style="text-align: left; width: 40.2pt;">27.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">10.0&nbsp;</td>
<td style="text-align: left; width: 43.2pt;">0.0&nbsp;</td>
<td style="text-align: left; width: 48pt;">20.0&nbsp;</td>
<td style="width: 48pt;">Price/NTA</td>
<td style="text-align: left; width: 42.6pt;">0.5</td>
<td style="text-align: left; width: 42.6pt;">0.7&nbsp;</td>
<td style="text-align: left; width: 48pt;">0.8&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">0.7&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Market cap</td>
<td style="width: 48pt;">NZ$147m</td>
<td style="width: 48pt;">Imputation (%)</td>
<td style="text-align: left; width: 40.2pt;">76</td>
<td style="text-align: left; width: 42.6pt;">50</td>
<td style="text-align: left; width: 43.2pt;">50</td>
<td style="text-align: left; width: 48pt;">50</td>
<td style="width: 48pt;">Cash div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">27.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">10.0&nbsp;</td>
<td style="text-align: left; width: 48pt;">0.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">20.0&nbsp;</td>
</tr>
<tr>
<td style="width: 48pt;">Avg daily turnover</td>
<td style="width: 48pt;">204.6k (NZ$585k)</td>
<td colspan="3" style="width: 130.8pt;">*Based on normalised profits</td>
<td style="width: 43.2pt;"></td>
<td style="width: 48pt;"></td>
<td style="width: 48pt;">Gross div yld (%)</td>
<td style="text-align: left; width: 42.6pt;">35.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">11.9</td>
<td style="text-align: left; width: 48pt;">0.0&nbsp;</td>
<td style="text-align: left; width: 42.6pt;">23.9&nbsp;</td>
</tr>
</tbody>
</table>
Managed exit from Togo
THL will retain an effective 26.5% stake in Togo through preference shares, which will pay an annual fixed dividend of&nbsp;~US$0.6m. This means THL has no&nbsp;further funding obligations for Togo.&nbsp;THL's&nbsp;stake is reduced by 23.5% reflecting:
<ul type="disc">
<li>6% for a cash payment of US$6m from JV partner Thor.</li>
<li>17.5% for (1) the exclusive rights of Togo Fleet globally to specified types of third parties, (2) the rights for peer-to-peer RV&nbsp;rental platform&nbsp;Mighway&nbsp;in Australasia, (3) the rights for use and sale of Togo Insights (RV&nbsp;telematics), and (4) Togo's 46% shareholding in Australasian travel and tourism online business&nbsp;Outdoria&nbsp;(which incorporates&nbsp;CamperMate).&nbsp;</li>
</ul>
Thor has an option to acquire&nbsp;THL's&nbsp;remaining stake for US$20m, exercisable within the next four years. The preference shares will convert back to common equity if Thor doesn't exercise its option.&nbsp;
Earnings boost from Togo exit
In anticipation of a wider business update from THL, we adjust our modelling solely for the managed exit from Togo. No further Togo&nbsp; investment, together with its preference share dividends, lead us to upgrade earnings in each of our explicit forecast years. The impact on NTA (net tangible assets) is immaterial and therefore we make no change to our target price.&nbsp;
Andy Bowley andy.bowley@forsythbarr.co.nz +64 4 495 8246&nbsp;
Scott Anderson scott.anderson@forsythbarr.co.nz +64 4 914 2219

Tourism Holdings
Togo'ing
UNDERPERFORM
Tourism Holdings (THL) has structured a staged exit from its tech JV Togo; it should at least take out of the JV what it it put in. The deal values Togo at US$100m, modestly but not materially above book value, and compares to inception value of US$94m. While the blue sky option value for Togo now disappears, THL protects itself from further near term cash calls, in a period when balance sheet preservation is critical. While THL now trades at a meaningful discount to its net tangible asset value, we believe this is appropriate given significant demand uncertainty, and consequently, (1) the potential for operating losses as a result of inbound tourism markets being shut by border closures, and (2) vehicle sales markets being impacted by recessionary conditions. We retain an UNDERPERFORM rating.&nbsp;
         


NZX Code
THL
Financials:Jun/
19A
20E
21E
22E
Valuation (x)
19A
20E
21E
22E


Share price
NZ$1.00
NPAT* (NZ$m)
27.9&nbsp;
9.7
-14.8&nbsp;
44.2&nbsp;
EV/EBITDA
3.0&nbsp;
3.2
5.7&nbsp;
2.1&nbsp;


Target price
NZ$1.50
EPS* (NZc)
22.2&nbsp;
6.5&nbsp;
-9.7&nbsp;
28.7&nbsp;
EV/EBIT
5.5&nbsp;
8.9&nbsp;
n/a
3.9&nbsp;


Risk rating
High
EPS growth* (%)
-28.3
-70.4
n/a
n/a
PE
4.5&nbsp;
15.3&nbsp;
n/a
3.5&nbsp;


Issued shares
147.1m
DPS (NZc)
27.0&nbsp;
10.0&nbsp;
0.0&nbsp;
20.0&nbsp;
Price/NTA
0.5
0.7&nbsp;
0.8&nbsp;
0.7&nbsp;


Market cap
NZ$147m
Imputation (%)
76
50
50
50
Cash div yld (%)
27.0&nbsp;
10.0&nbsp;
0.0&nbsp;
20.0&nbsp;


Avg daily turnover
204.6k (NZ$585k)
*Based on normalised profits


Gross div yld (%)
35.0&nbsp;
11.9
0.0&nbsp;
23.9&nbsp;



Managed exit from Togo
THL will retain an effective 26.5% stake in Togo through preference shares, which will pay an annual fixed dividend of&nbsp;~US$0.6m. This means THL has no&nbsp;further funding obligations for Togo.&nbsp;THL's&nbsp;stake is reduced by 23.5% reflecting:

6% for a cash payment of US$6m from JV partner Thor.
17.5% for (1) the exclusive rights of Togo Fleet globally to specified types of third parties, (2) the rights for peer-to-peer RV&nbsp;rental platform&nbsp;Mighway&nbsp;in Australasia, (3) the rights for use and sale of Togo Insights (RV&nbsp;telematics), and (4) Togo's 46% shareholding in Australasian travel and tourism online business&nbsp;Outdoria&nbsp;(which incorporates&nbsp;CamperMate).&nbsp;

Thor has an option to acquire&nbsp;THL's&nbsp;remaining stake for US$20m, exercisable within the next four years. The preference shares will convert back to common equity if Thor doesn't exercise its option.&nbsp;
Earnings boost from Togo exit
In anticipation of a wider business update from THL, we adjust our modelling solely for the managed exit from Togo. No further Togo&nbsp; investment, together with its preference share dividends, lead us to upgrade earnings in each of our explicit forecast years. The impact on NTA (net tangible assets) is immaterial and therefore we make no change to our target price.&nbsp;
Andy Bowley andy.bowley@forsythbarr.co.nz +64 4 495 8246&nbsp;
Scott Anderson scott.anderson@forsythbarr.co.nz +64 4 914 2219

Tourism Holdings

Tourism Holdings: Togo'ing