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THL shares rated 'buy'

Friday 15th September 2000

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The tourism sector goes under the spotlight because of the lower dollar, writes CHRIS HUTCHING

Sharebroking analysts are rating Tourism Holdings as a "buy" as the share price continues to come under selling pressure from an institutional shareholder despite excellent prospects for the next 12 months.

Managing director Denis Pickup said he met analysts from US-based pension funds recently who explained they were selling down THL shares because they were readjusting their investment portfolios in favour of stocks with larger market capitalisation.

"We're just too small for them but our own analysts in this country are rating us positively, especially with the dollar at current levels."

In recent weeks THL's share price has softened and was this week just under $2.50 compared with its 12-month high of $3.20. This is despite the recent strong after-tax profit of $14.8 million, just shy of earlier forecasts, and a 5c a share dividend. The outlook for the coming year with just three months of trading under way is for $26.8 million, which will reflect a full-year contribution from the Britz tourist fleet acquisition rather than the eight months of consolidation during the recent year.

Researchers from Ord Minnett, J B Were and ABN Amro all confirmed they were bullish for the stock, particularly with the low New Zealand dollar.

Mr Pickup said the currency had less effect on Tourism Holdings' retail operations than on inbound wholesalers but there was a flow-on effect on the business.

The main thing overseas tourists looked at when considering a trip tended to be the price of airline tickets. At the moment airline prices were relatively low - despite high fuel prices - because of overcapacity but that might change.

While the level of business from THL's 3600-tourist fleet may be influenced by the price of petrol, northern hemisphere tourists would still find petrol relatively cheap in New Zealand.

Current bookings for THL's vehicle fleet were light because of the Sydney Olympics but were strong for the period after October. About 37% of the company's profitability came from Australia and 24% from New Zealand in the year under review to June 30, 2000.

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