Weekly Reports | Oct 20 2021
By Tim Boreham, Editor, The New Criterion
Ahead of The Great Reopening – terms and conditions apply - investors pre-emptively have been piling into the travel and tourism faves such as Flight Centre ((FLT)), Webjet ((WEB)) and Qantas Airways ((QAN)).
There’s nothing wrong with that, especially given the travel agents have a heavy presence in offshore markets where the malevolent virus is being treated as a mere inconvenience.
On October 1, Scott Morrison announced that Australia’s international borders would be open to vaccinated travellers from November.
As it happens, the decree applies to Australian citizen and permanent residents returning home, with a decision on allowing tourists slated for “further down the track”.
So despite Qantas chief Alan Joyce’s enunciated flight timetables, one has to doubt when the walls of fortress Australia will really come a tumblin’ down.
Because of that, the pure-play domestic tourism operators would seem to be the safer bets.
Having said that, most of them have also run hard.
Experience Co ((EXP))
Strap yourself in: the adventure-oriented operator is girding for a powerful domestic tourism recovery with its $47m cash-scrip acquisition of Trees Adventure, the biggest provider of ziplining and rope courses facilities at 14 sites in five states (staid SA misses out).
The purchase is a chunky addendum for Experience, which is best known for tandem skydiving across 17 locations here and in NZ.
In April Experience shelled out $4-5m for Wild Bush Luxury (owner of the Arkaba Walk and Homestead in the Flinders Ranges and Bamurru Plains in Kakadu) and Tassie’s Maria Island Walk.
Experience on October 4 finalised the institutional stanza of a $55m equity rights raising struck at 33 cents per share, with the retail component due to close on October 19.
The Trees Adventure purchase is an ambitious one size-wise, but unlike first time abseilers investors should not be too concerned as the business looks to be within management’s comfort zone.
Trees Adventure last year made a proforma earnings before interest tax, depreciation and amortisation (ebitda) of $7.3m.
Put in context, Experience itself managed ebitda of $6.4m, better than the $5.2m in 2019-20 but well off the $16.3m in the pre-pandemic 2018-19 year.
Over the two years Experience’s revenue fell to $44m, from $130m.
It’s not surprising that visitor numbers will dwindle with the closed borders, but some sectors – notably Great Barrier Reef diving tours – remained surprisingly robust (at least until the Sydney lockdown hit).
Management expects a “fast snap-back as and when lockdowns and restrictions are eased.”
Broker Ord Minnett doesn’t expect overseas border re-openings to impact until the 2022-23 year, when it forecasts $111m revenue and ebitda of $25m.