Yovich & Co. Market Update - 20 February 2017
Feb 20, 2017 | Commentary
The local market has been reasonably steady since the start of the year, consolidating the end of year rally above the 7,000 point mark. Port of Tauranga has shot up over 13% in the last month as Investors continue to value the opportunity of the “Big Ships” with a new deal with Hamburg-Sud.
The Aussie market has continued to outperform the NZ market as resource stocks recover from their lows on the back of improving commodity prices. As an indication of the rebound, BHP and RIO are both up 60% over the past year.
The Rally in US equities has picked up steam again since Trump officially took control of the White House. Tech Companies like Apple and Tesla have surged over 10% in the past month.
The FTSE in London moved to all time highs as it appears that Article 50 is cleared to be signed by the UK Parliament and the process for BREXIT can continue. The rally in the UK share market clearly doesn’t paint the full picture as the currency is still at record lows to the Greenback.
The Reserve Bank of New Zealand kept rates on hold at the meeting on February 9th and indicated a neutral bias, which is contrary to the message last year which indicated that there could have been several rate rises this year. The reaction has been a fall in the Kiwi against both the Aussie and US Dollars.
Tourism Holdings (THL.nz) – FNZC Initial Research
First NZ Capital initiated coverage of Tourism Holdings this month after the company has steadily grown their business and now features in the top 50 companies on the market, ranked 43rd with a market cap of $462 Million.
Description of their Business from IRESS: Tourism Holdings Limited is New Zealand’s premier tourism company. It is the largest provider of holiday vehicles for rent and sale in Australia and New Zealand under the Maui, Britz, Mighty, KEA Australia and Motek Vehicle Sales brands. In the USA it owns and operates the Road Bear RV Rentals and Sales brand. Within New Zealand Tourism Holdings Limited also operates Kiwi Experience and the Discover Waitomo Group, which includes Waitomo Glowworm Caves, Ruakuri Cave, Aranui Cave and The Legendary Black Water Rafting Co.
Recently the company has acquired El Monte, who operates a fleet of 1,350 rental motorhomes based mainly in California but also have rental locations around the US. This adds to their existing presence in the US with the fleet of approximately 700 motorhomes through the Road Bear and Britz Brands.
FNZC continues to see positive earnings growth with a Sum of the Parts DCF valuation of NZ$3.70 and 12-month target price of NZ$3.93. They are forecasting a EV/EBITDA multiple of 7.3 times and Price to Earnings ratio of 16.1 which looks fair and a gross yield of 6.1% does not look expensive for a company that has been able to consistently grow earnings. Risks include execution of the company’s multi-brand digital strategy, increased competition, global tourism growth (particularly from Europe), oil price movements, airline capacity changes and AUD and USD translation risk.
Sources: First NZ Capital and IRESS Market Data.
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