Daily ShareChat: Tourism Holdings

By Jenny Ruth

Wednesday 30th September 2009

Tourism Holdings should be considered "very much a late cycle recovery play" because trading conditions remain challenging and he expects negligible earnings in its 2010 financial year, says Craigs Investment Partners analyst David Oxley.

The company reported a $2.87 million net loss for the year ended June and Oxley is forcasting a $0.05 million result in 2010 before rising to $3.35 million in 2011.

While management gave no explicit guidance for 2010, it said "the impact of the global financial crisis on tourism is obvious and ongoing."

Oxley says he cut his near-term estimates to reflect a likely decline in visitor arrivals from key Tourism Holdings' source markets in 2010.

"A combination of a stock with cyclically depressed earnings and an above-average risk profile may offer appeal at a time when risk appetites are increasing and equity markets are beginning to price in a recovery in global economic conditions," he says.

But the company isn't likely to return to a reasonable level of bottom-line profitability until 2011 and the stock is trading on more than 20 times that year's earnings.

"While it is always possible that the recovery we expect in 2011 earnings (assuming global economic conditions continue to improve) will be greater than we now forecast, given the operational gearing inherent in Tourism Holdings' businesses, we believe it is too early to aggressively bet on such an outcome."

BROKER CALL: Craigs Investment Partners rate Tourism Holdings as hold.

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