Forum Archive Index - March 2002

[hugh webber <hugh.webber@clear.net.nz>]

To a fundamentalist there are 4 underlying factors - the NTA approach which 
Peter
has covered; the earnings stream valuation which THL has just reported on;
the quality of management; and analysis of the market that they are producing 
for
and selling into. I suspect that particularly in the case of THL "technical 
analysis" is
no use at all because it does not address these underlying factors and if you 
can't understand
where you are coming from then you can't understand where you are going to.

I haven't studied THL and have not been a holder. We have a witness account of 
how busy some of
their operations are and we have evidence of higher visitor arrivals in NZ 
despite Sept 11. The
greatest damage to their result seems to have occurred in Australia and this 
makes me suspect that
they had some sort of tacit or even formal tie up with Ansett and when Ansett 
began staggering in
April last year then their feeder in started drying up. It has also been 
apparent that THL has
consistently underperformed over a number of years and someone needs to start 
weeding out the
management. They also need to do an analysis of contribution to net profit by 
activity and dispose
of those activities not contributing. Are for example camper vans only 
contributing for say 3
months a year? Are they paying out too much on maintenance on campervans? Is 
the employee expense
or management expense high per campervan? & &. At the moment they seem to have 
caught one of the
BIL diseases - that of selling of the most successful activities first and 
getting further into the
crap.

Or maybe, more fundamentally, are they involved in a commodity business?
Airlines are recognised as a commodity business, so are hotels. 
Is there too much competition in the line(s) they are in?

A commodity business is defined as one where there are no or very low barriers 
to entry of new
competitors and where customers make their purchase decisions totally, or 
nearly totally, just on a
price basis. Does that fit what THL is doing?
If that is the case the best idea is to get out as commodity businesses are 
typified by only
occasional and irregular periods of profit but predominantly periods of loss.

What Buffett defined as a consumer monopoly is typified by Auckland Airport - 
no competition,
insuperable (in this case) barriers to entry, and purchase of its services is 
not governed by
price. And haven't they done well....

cheers,
Hugh

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