Forum Archive Index - March 2002

["Peter" <pmaiden@today.com.au>]

Jim - you wanted a fundamentalists view of THL.

Very difficult to put a value on THL in view of it's cuurent 
distressing performance.

If they closed down tomorrow and realised 50% of what they are worth 
yheir value is about $0.95 per share. Eliminate the $40M of goodwill 
this figure is about $0.73. Net tangible assets are about $1.46 per 
share. 

Therefore the market is currently valuing THL as a pretty distressed 
company. If there is a turnaround then the value of THL will 
obviously increase. But by how much?

I tend to look at what performance is needed to cover the cost of 
capital, ie creating value for shareholders. At $1.02 the market is 
saying that THL is going to destroy another $140 million of 
shareholder value in the future.

So what does THL need to do to cover it's cost of capital? Allowing 
for both equity and debt about $21 million in after tax profits. At 
this level of performance THL could demand a shareprice in excess of 
$3.00

The biggest problem THL has is it's high fixed expense base. Revenues 
are a key driver to profitability. A quick sum suggests that at least 
20-30% increase in revenues is needed to get to this figure along 
with some reduction in variable costs (maybe along the lines of what 
Hans is getting at, management excesses?)

Therein lies the problem. THL track record is very poor. They are 
also talking about selling some of their revenue generating assets. 
They are also talking about delaying upgrading their fleet. Not a 
pretty picture.

This has to be a turnaround story of immense proportions if the 
shareprice is to get back where it was a few years ago. If you think 
they can do this and have faith that current management can do it 
stick with them. If not already in get in now.

My view is that things don't change unless something major disturbs 
the status quo. I don't see that presently happening in THL and would 
not go anywhere near them. 

THL love showing the graph of visitor arrivals to NZ. I did write to 
them to overlay their profit performance on the same graph but did 
not get any response. As vistor numbers have gone up over the years 
THL profits have gone down. That is how sad this whole sorry affair 
is.

A fundamentalists view. When companies get to this level of 
performance it really is a matter of what if, faith and hope. In the 
case of THL you could say that a fair value could be antyhing in 
betweem zilch and say $3.00 in a few years. On what we know today the 
current value is probably appropriate.

Cheers

Peter


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