Broker still rates tourism firms

Ken Lister
Ken Lister
Air New Zealand, Tourism Holdings and Auckland International Airport are still rated highly by Dunedin-based sharebroker Forsyth Barr despite a reduction in tourist numbers in April.

Statistics New Zealand figures showed that tourist arrivals were down 7.2% in April compared with the previous corresponding period.

April tourism arrivals were affected by the timing of Easter, the strong dollar and increasing ticket prices.

Forsyth Barr broker Ken Lister said he had recently moderated his conviction in the growth in near-term tourism growth due to the increased volatility in the dollar.

"However, we have retained our positive medium-term outlook, with an emphasis on long-haul travel originating from the United Kingdom, Europe and Asia ex-Japan."

The April numbers were lower than expected, which placed some downward pressure on near-term forecasts for tourism-related companies, he said.

Rising ticket prices to recover the cost of the high fuel price was becoming an issue for the medium-term outlook.

For Air New Zealand, the rapid increase in fuel was hurting the company's short-term earnings.

The company should not only be able to manage its way confidently through the challenging environment but also emerge in a stronger competitive position, Mr Lister said.

Forsyth Barr had retained its long-term target for Air New Zealand's operating earnings to trend up towards $400 million based on the strength of its fleet and product offering on key routes into Hong Kong, North America, London, the transtasman and its dominant position in the New Zealand domestic market.

Air NZ was trading at $1.16 a share but Forsyth Barr had a value of $2.34, he said.

THL was trading at $1.83 but was valued at $2.88.

The company was implementing a wide range of restructuring and business initiatives in favour of growing its rentals operations, the basis of Forsyth Barr's favourable medium-term view.

"We believe there is a chance that THL could dispose of the remaining two leisure group businesses of Waitomo Caves [target value $40 million] and Milford Red Boats [$15 million], which would see THL be debt-free by the year end."

Auckland International Airport was a "quality" long-term investment given its control of New Zealand's major tourism gateway, the solid long-term tourism growth outlook and its large holdings of "strategic land".

The immediate future remained challenging due to the impact of the strong dollar on visitor arrivals, regulatory uncertainties and capital expenditure. .

Auckland airport was valued at $2.67 and last traded at $2.24.

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