Originally Posted by
Sauce
Hi Bull
I thoroughly enjoyed reading your analysis of THL.
My thoughts are this; Why not look for a business with better economics?
If you believe THL returns are stable, and assuming they don't decide (or need) to retain more profits in the future, then a price to book of about 0.35 - 0.38 seems about right - at this price point (about 65-70cps) the returns might arguably be worthwhile considering the risks - but with basically no margin of safety whatsoever.
I couldn't help but chuckle at the following comments from the chairman in the annual report
I am pleased to report that thl’s balance sheet remains strong, with
net debt levels down from $58m to $37m at year-end, providing an
equity ratio of 62% and a debt-to-debt-plus-equity ratio of 21%. It
is also a competitive advantage that differentiates thl from other
operators and thus stands the company in good stead.
Throughout poor economic cycles thl has proven that the business
model can adapt and provide security to shareholders through
effective capital management.
I wonder if the chairman has been smoking something usually passed around in THL's camper vans :0
Just kidding (sort of!).. but I do think there are businesses with better economics providing much more obvious value on NZX right now. As an exercise it's been fun to take a look at THL, and to read your post and analysis Bull. Thanks for posting it here.
I would love to know if, and where, you see value in owning THL.
Regards,
Sauce