Our neighbours in Europe had a campervan. As it grew colder, these retirees would load onto the ferry and drive south. Chasing the sun in France, Spain or Italy.
From this point on, nothing was booked. Not even the ferry back. They stayed mostly at French Aires — low-cost or free camping areas, often near the motorways.
I thought of this couple after analysing Tourism Holdings Ltd [NZX:THL] on the NZX.
The company caught my attention for three reasons. It looks relatively cheap on what has now become an expensive exchange. The gross dividend yield sits currently at a juicy 9.6%. And they’re going through an $80m capital raising rights offer, including a placement to HB Holdings (wholly-owned subsidiary of the China-based CITIC Capital International Tourism Fund).
THL listed on the stock exchange in 1986. It’s the largest provider of holiday campervans for rent and sale in Australia, New Zealand and the United States. It also operates Kiwi Experience Bus Tours and Discover Waitomo — including glow-worm caves, black-water rafting and other activities.
I’ve been watching the company for a while. Tourism is New Zealand’s biggest export industry in terms of capturing foreign exchange. I want a piece of it.
But is THL the right piece?
Last financial THL had total revenue of $426m. This has grown from 2014, when it pulled in just $228m.
Yet THL is down fast and hard. This time last year, the share price was up around $6.60. At the time of writing, it’s been beaten down around the $3.60 mark.
Back in April, the company took a nasty tumble. Shares fell 24% when THL lowered profit guidance and admitted the US business was faltering.
Now we’ve seen this before. A small company from NZ tries to capture a slice of the big American market. It’s far harder than the numbers present.
Yet, with revenue growing, favourable metrics, a capital raise to push its global growth strategy and strengthen its balance sheet — maybe it’s time to buy THL?
I notice Forsyth Barr has an ‘outperform’ rating on it in their research note. They say ‘THL is an RV/campervan centric tourism business executing a value accretive and growth strategy.’ They’re seeing improved return on capital, a more competitive cost base and favourable industry growth trends.
And by all my measures, it’s looking pretty good too. Favourable P/E. Reasonable book value, margins and return on equity. Not to mention that dividend.
But there’s one thing I can’t get past. I’m not sure Forsyth is right in the long-run on those favourable industry growth trends.
I’m investing for the long-run. My kids will probably end up earning from our portfolio.
Then I think of the kids exploring Pam and Mike’s camper. Last time they had it out front, preparing to drive to France.
See, Pam and Mike are in their 70s. And most of the camper drivers I see are older.
Will my generation take to big THL-style campers? What about those younger than me? When the baby boomers get too old to drive (over the next decade or so) — who’s going to want those campers?
I asked my wife once if she wanted to RV across the States.
It was written all over her face: ‘No, thank you, sir!’
So I asked some friends.
The most telling response was: ‘Hell, no. Why would I want to be hauling us around in a poky camper when I get can great value on Airbnb?’
Big trends in online commerce — ride-sharing and now accommodation-sharing — is changing the world.
I reckon campers have some growth to run. But in the long-term, roads are getting fuller. Electrification and self-drive will impact transport. Places on Airbnb are getting cheaper and more diverse as real-estate owners hunt for return.
Of course, I may be wrong. THL probably does have some growth and share-price gain to run. But with investing, you must form a view, take a conviction and stick with it.
Perhaps if you own a camper and are part of that group, you can see opportunity I don’t. Maybe I’m missing out.
Then again, if the economy continues to implode, maybe there’ll be another demand driver for campers:
- A place to live.
- Permanent tourism.
But, seriously, driving your home around on your back like a snail?
OK, I’m joking. Some of the happiest, friendliest people I’ve met on the road are in campers.
Still, I think I’ll wait for the Airbnb IPO.
Which brings me to a final piece of news.
With the NZX continuing to look pricey, unless we spot some clear opportunities, you’re going to increasingly see our focus change to stock investment opportunities in other markets.
Don’t worry: we have a new product coming soon which will show you how to invest on the ASX and other global exchanges. You must go where the opportunities are.
The road awaits. And that’s exciting.
Editor, Money Morning New Zealand