Daily ShareChat: Tourism Holdings
By Jenny Ruth
The market may take a more cynical stance on Tourism Holdings's US$17 million (NZ$22.7 million) acquisition of US recreational vehicle rentals business Road Bear, based in Los Angeles, the company has a more optimistic view, says Rob Mercer at Forsyth Barr.
“Road Bear operates in a sector that Tourism Holdings has decade of experience in and the acquisition is of a size which should enable Tourism Holdings to leverage its resources without placing a strain on its existing business,” Mercer says.
“Over the medium term, there should be synergies in managing the sales and marketing relationships of both companies targeting European tourists.”
Mercer says the vendors had run the Road Bear business well through the global financial crisis and it has been profitable over the last five years.
“If you are wondering why Tourism Holdings has made this move into the US, it has been well signalled for almost two years.”
While Tourism Holdings' near-term earnings have been below expectations, its balance sheet is in a strong position, allowing it to debt fund the Road Bear acquisition, and its Australasian operations are “in great shape to benefit from a general recovery in tourist arrivals,” Mercer says.
“We see current low earnings being cyclical, not secular, and this is the basis of our positive investment view,” he says.
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Employees may have an interest in the securities discussed in this report.
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