I can understand why people aren’t rushing to invest in the travel sector currently as the situation looks very bleak with Covid worsening and further travel restrictions and lockdowns being added on a daily basis around the world. But we also have to consider that the valuation of the well established and previously successful companies in these sectors, which have been hit hard by the virus, isn’t really about what happens over the next few months, but more so their future, assuming that they are able to survive long enough to actually have one of course. The market is already forward looking to some extent and is attributing some value to the fact that at some point in the future people will be going on holiday in large numbers again, and revenue will be rolling in for these businesses, but currently I still think that in a few years time we will look back and won’t be able to believe the low levels that they traded at, and that we had a chance to buy them at that price, especially when taking a longer term view.
For the last year many people have been saving money - especially the millions who have been furloughed - and providing they don’t all lose their jobs eventually, when travel becomes possible again many will be itching to get away with the family and I would expect to see holiday bookings rocket, especially for those travelling to destinations within Europe. TUI AG (TUI) was doing very well prior to the pandemic and started 2020 with record bookings and looked like it was about to have a very strong summer, but the arrival of the virus led to a suspension of all of its operations for several months, and even when it did manage to restart again in June, bookings were significantly lower than normal. That meant that for the year up until the end of September 2020 it recorded a pre-tax loss of €3.129 billion, compared to a €691 million profit for the previous year. It also saw the dividend suspended - it had been €0.54/share in 2019 - and net debt soared to more than €4.55 billion.
As a result of agreeing additional support from the banks, at the end of November last year it had liquidity of €2.5 billion and has just completed a €1.8 billion refinancing package which included a €544.6 million rights issue. In addition to the RI, it also agreed a €1.091 billion package with the German Economic Support Fund, plus a €200 million revolving credit facility. There isn’t too much point going through the accounts for last year in detail, as other than showing why the need was there to refinance, they aren’t particularly indicative of the future potential or how the company could perform after Covid is gone or becomes controllable and travel starts to return to normal. That return towards normal seems to have suffered a bit of a set-back at the moment, but in my view still largely boils down to the vaccine and when we reach a situation where few people are actually dying from the virus. That should start to happen once all of the most vulnerable - who currently make up most of the deaths and hospitalisations (around 15% of the population make up over 85% of those figures) - have been vaccinated, which I would expect to be around late March/early April in this country, and not too dissimilar in Europe, as long as things go to plan. If that is the case, then we may see people prepared to book holidays this summer – especially if we see a relaxation on the quarantine rules for those returning to the UK, or for entering certain countries, although testing before you fly may well continue I suspect.
I know that TUI does holidays all over the world, including flights and owning hotels, plus offers various cruises, but I do see that European market as an important first step towards recovery and persuading people that it is safe to go away again. None of us know what is going to happen in the coming months, as there have already been so many twists and turns, and not many last April/May thought we would be back in another lockdown now. So there is no point trying to predict revenue, profit and the like for the company over the coming year, as even internal estimates by those who know the business inside out could end up being wildly out, and for me this simply boils down to whether or not you see the industry eventually recovering, and if you see enough financial strength in TUI that it will be there to take advantage when that does happen. A lot of my investments tend to be based on the figures, but I also believe that we need to adapt to take into account the impact of Covid, and that many companies that have been badly hit and appear weak on paper, will ultimately recover well, and I see TUI in that category.
The theoretical ex-rights price of the shares amounts to somewhere around the 315p area, and the shares were last around 398p having had a decent bounce. For a while the rights, which are tradeable, were actually priced at significant discount to the prevailing market price of the shares, so there was actually no point buying the shares – you were far better off buying the rights and that saw some weakness and a drop to just below 340p, before that arbitrage gap disappeared and the share price bounced strongly. I’m not necessarily saying I would be rushing out to buy the shares now as I think that we may see some further weakness to come – especially once retail traders receive their shares from the RI and possibly cash some of that in for a profit, and even more so given that some here will have suffered substantial paper losses over the past year. We may also see some general market weakness over the next month or two as well, which could easily drag TUI shares down with it temporarily. But I definitely view it as one to add to your watchlist (I’ve added it to my mine) as a longer term recovery play and if you also see potential here, to buy into any further dips, and even more so if it gets anywhere close to the recent lows again. Even if you do end up paying more than the theoretical ex-rights share price, which seems likely if you do want to buy in as I’d be surprised to see it that low again, you are buying into a business that is in a much better funding position than it was previously.
Filed under: TUI AG, TUI, St James House, [email protected] Capital, Superdry, Mountfield, Corero
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.