IPO - Tourism Holdings Rentals Limited - TBA, page-2

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AKiwi bred horse ran third in thecup,butthis one has better form
Consideringthelong-awaitedapproval of the merger with ATL, we have
elected to revisit our investment thesis andupdate our numbers for recent
developments. Having already incorporated ATL into our THL numbers,
the green light came as no surprise to us and were-iterate our Buy rating
based on the following investment positives: 1) The merged entity will
now have a very strong market position in the Australia/NZ (ANZ) RV
rental market; 2) Synergy benefits at the EBIT level estimated atNZ$23-
NZ$24m pa; 3) THL hasaproven track record of delivering solid returns
on invested capital; 4) The demand outlook for RV rentalsappears tobe
improving; 5) The material increase in RV production during the pandemic
has largely been in towable not motorised product which we view as a
positive for the merged group; 6) The Canadian rental business acquired
as part of the deal is a quality asset that fills an obvious gap for THL; 7)
The dual listing of THLprovides access to a larger investor pool and
increases the potential for a re-rating of the stock; and 8) The balance
sheet of the merged group appears sound noting the bulk of debt is fleet
matched against an aggressively written down asset. Despite our positive
view on the Company, it is not without challenges notably the macro-
economic outlook and supply chains issues which have the potential to
delay the fleet replenishment strategy.
Both businesses appear to be performing well pre-merger
Both THL and ATL have separately provided earnings upgrades over recent
months. This reflects the incremental improvement in inbound travel post
Covid and strong demand for domestic leisure.
The path to the finish line is now clear as crystal
The Company is nowableto provide a definitive timeline on completion of the
merger. Barring something unforeseen, dual listing in now expected 1 Dec 22.
Investment View–Retain Buy PT $5.02(prev $4.93)
In broad terms, our EPS estimates have been upgraded(20% in FY23 and
3% in FY25–modest decline in FY24)to reflect the stronger than-expected
FY23 NPAT guidance and mergersynergies. The 12-month price target has
been derived from a discounted FY25 PER methodology and has increased
2% to $5.02due to our earnings revisions. We retain our Buy rating