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Daily ShareChat: Tourism Holdings

By Jenny Ruth

Wednesday 18th August 2010

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 Jenny Ruth

Tourism Holdings' near-term earnings remain weak but the company has done "a great job" in managing cashflow and its net debt probably fell by $16 million to about $40 million in the year ended June, says Forsyth Barr analyst Rob Mercer.

Another factor to take into account is the quality of Tourism Holdings' assets, Mercer says. The average age of its motorhome fleet in Australia is 1.3 years and two years in New Zealand. He expects its new CI Munro motorhome manufacturing facility to be profitable in the year ending June 2011 and its newly completed visitor centre at Waitomo Caves "will be a major drawcard of visitors to the region." Previously, most tour coaches had bypassed Waitomo as a place to stop for meals because the facility was to small.

Mercer values the company's net tangible assets at $1.41per share.

While the CI Munro relocation from Otorohanga to Hamilton was completed in the year ended June 2008, the transition didn't go well and, over the past year, operating performance was negatively impacted by declining numbers of motorhomes being built.

After a number of improvements in the manufacturing process, as the number of motorhomes increases towards normal levels of 650 to 700 a year, CI Munro's profit performance should improved markedly, he says.

Recommendation: Buy.

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