Tourism Holdings Ltd [NZX:THL] was sapped with the same risk-off sentiment affecting most of the global markets today.
The company is involved in the manufacturing, sale, and rental of motorhomes. It’s active in the Australasian and US markets. It has manufacturing operations in New Zealand and Australia. As a group, it employs over 1,500 people.
According to the Tourism Holdings website, employees enjoy ‘generous rental rates’ on campervans. And free-of-charge access to all THL tourism attractions.
The company has a market capitalisation of $287 million, and the share price currently sits at $1.80.
Why has the [NZX:THL] share price plunged today?
Since we last reported on the THL share price in early June, there has been further drawdown.
Historically, some 90% of sales have come from international tourism. With its international business drying up, the company has been forced to pivot around the domestic market.
Unfortunately, several factors have worsened the outlook for THL:
- Hopes for a trans-Tasman bubble now seem more distant.
- Two top executives have resigned — Chief Financial Officer Jennifer Bunbury and Chief Operating Officer Jo Allison. Resignations at senior posts are often disturbing for investors, though Allison’s reason was due to a move to Christchurch.
- The global-risk environment has worsened, with concerns of a second-wave of reinfection.
- Some countries — such as Germany, China, and South Korea — have gone back into lockdown or face renewed restrictions.
- The New Zealand border looks set to remain closed for the foreseeable future.
Where could [NZX:THL] go from here?
It looks to me this share will continue to take its cues from the global travel market. Plus, the willingness for financial markets to take on longer-horizon risk.
While domestic demand looked to initially fill some of the revenue gap — alongside government subsidy support — a weakening of the New Zealand economy will also weigh in.
With a current P/E around 10 and book value per share that looks to be in excess of $2, THL does appear to present some value. Especially for those with a clear view on the recovery of international visitors and tourism.
In better times, in 2019, this was a stock that traded above $4.
It is also likely to show volatility as travel news (and the global sentiment) ebbs and flows. For more active traders, that could present opportunity to profit.
Now, I may be a little biased against this stock long-term. I see Airbnb and its coming IPO as a far more attractive option as both a holidaymaker and potential investor. But that is because I dislike the snail-factor of motorhomes, as both a holiday home and driving proposition.
But we must put this aside. My ageing neighbours in Europe loved their camper. They enjoyed the fact they could drive across France without need to arrange accommodation. And few other costs beyond diesel.
There is a market. It could be growing. Is this the best risk instrument to capture that?
Editor, Wealth Morning
PS: Do you have more questions? Subscribe to our free newsletter and gain access to our Wealth Talk podcast radio show. Next Friday, we’ll be interviewing experienced financial adviser Alan Borthwick on the state of markets and money.