Dancing On My Own
2019 has proven a difficult year for TUI, with a tough trading backdrop in its Markets & Airlines segment, coupled with the grounding of the Boeing 737-Max, leaving full year earnings (we forecast €0.87 per share) back down to 2016 levels. Operating profit from this channel is estimated to have fallen by some €500m during the last two years masking continued progress in higher quality Holiday Experiences, where the contribution is estimated to have more than doubled to over €1 per share since 2016. With 22m customers and £10bn of revenue, is the demise of Thomas Cook a game changer? At the very least, tighter market conditions, coupled with the unwinding of 737-Max costs, supports a recovery in profitability going forward. We do not believe that this opportunity is being reflected in the current valuation (12x 2019F EPS), with the higher quality cruise and hotels worth c1,150p per share alone. A full recovery in Markets & Airline (improving earnings to c€1.50 per share) increasing fair value to near 1,600p per share.
26 Sep 19
Reassuring trading update after TCG’s collapse
TUI has announced this morning that the closing of its summer trading is coming out in line with expectations, supported by the solid performance in both Hotels and Cruises, along with the significantly improved summer bookings. Therefore, the group has reiterated its FY19 EBITA guidance. Although we believe that TCG’s collapse could benefit TUI and certain European short-haul airlines, the collapse has also sounded the alarm bell for the entire traditional travel services industry.
24 Sep 19
Confirmation of FY 19 guidance
As expected, the group’s operating profit has continued to be impacted by the weak volume in tour operator activity and the B737 MAX grounding. However, the Hotels and Cruises businesses continued to perform well, benefiting from the diversification of product and locations. The group has maintained its FY 19 guidance.
13 Aug 19
The good performance in hotels and cruises have given relief to TUI’s heatstroke
Unlike its main peer TCG, TUI has continued to benefit from its overall integrated model. The group finished the year with solid figures above guidance and in line with the market’s expectations. The weak performance in the late-booking market in northern Europe due to the warmer summer has been fully offset by the continued strong demand for hotel and club activities, along with solid growth momentum in the cruise business.
13 Dec 18
Mixed Q3 results with reassuring booking numbers and lower margin generation
TUI reported a mixed set of Q3 figures with revenue growth above consensus expectations and margins under pressure due to cost inflation in the UK. Despite the challenging market conditions this year, the continuing strong demand in the Cruise business and increasing additional capacity offer a better mid-term outlook.
09 Aug 18
Cenkos: Leisure Sector -- Suspend coverage
Due to a change in sector focus Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon. Please contact Cenkos for further information.
TUI CCL CPG DOM GNK JDW JE/ MARS MERL MAB FLTR PTEC RTN TCG WTB WMH IHG SSPG
20 Jun 18
Solid Q2: on track to deliver its FY growth target
Q2 18 revenue was up +6.3% to €3.3bn and the underlying EBITA loss has improved from €157m to €134m, both broadly in line with consensus and our expectations. Management reiterated 2018 guidance: • Revenue growth at c. +3% (lfl, CER); • Underlying EBITA to grow at least 10%.
11 May 18
EBITA CAGR of at least +10% extended to 2020
Q4 underlying EBITA was in line. TUI released guidance of underlying EBITA 2018 growing at least 10%, in line with the medium-term targets, and extended its expectation of an EBITA CAGR of at least 10% until 2020 (from 2019). Although we may slightly increase our estimates, all in all TUI looks well valued.
13 Dec 17
Positive 9m EBITA, for the first time
Q3 revenue stood at €4.8bn (+13% yoy). The underlying EBITA came in at €236m (+20%). The company confirmed its guidance of at least 10% EBITA growth in 2016-17 and at least 10% CAGR for 2018-19. On the other hand, TUI now expects turnover growth of above +3% (vs. c.+3% previously).
10 Aug 17
A solid performance in spite of the context
TUI Group has released a Pre-Close Trading Update for the twelve months ending 30 September 2016 (which will be published on 8 December 2016). The performance is better than expected with very good developments in the UK and in Cruises. The guidance for the full-year results is now for 12-13% growth in underlying EBITA (10% previously).
29 Sep 16
Reassuring summer 16 figures
TUI Group posted positive H1 16 figures, in line with our expectations. The FY16 guidance was maintained (+10% in underlying EBITA, +10% underlying EBITA CAGR over 2017-18). Sales rose by 2.7% lfl while the seasonal operating loss narrowed by 16.3% (underlying EBITA at €237m). Summer 16 trading in line with expectations A strong UK market but Turkey has subdued the Nordic and the German markets Trends pointed to a 1% and 2% rise in bookings and sales respectively (bookings up 8% excluding Turkey), boosted by long-haul hotels (in the Caribbean) and cruises, while short and medium haul growth was fuelled by a strong demand for Spain, Greece and Cyprus. In the Source markets, the strong UK (+7% in bookings, 65% of the programme sold, ahead of the previous year) helped the Northern Region to deliver broadly flat performances. The UK benefited from a strong long-haul programme (Mexico, Dominican Republic and Jamaica being the most popular destinations) and the addition to the fleet of TUI Discovery. The Nordic market (-4% in sales, -9% in bookings) was penalised by the lower demand for Turkey (c.20% of Nordic customers in Summer 15), impacting sharply the trading (bookings up 12% excluding Turkey). A deterioration was seen in Central Europe, which was penalised by the tough German market (60% of the programme sold, sales and bookings down 2% and 3% respectively) which is being restructured and which suffered from a lower demand for Turkey. Western Europe also showed lower performances due to less demand for North Africa and the closure of Brussels airport, despite some improvements seen in the French market. Popular Caribbean and Mediterranean Coast: a strong support to Hotels & Resorts’ occupancy The Hotels & Resorts business experienced robust performances (€84m of EBITA vs €56m in H1 15, +2% in capacity, +4% in occupancy, +8% in average price/ bed). RIU was a strong support, reporting a 2% rise in capacity, 4% rise in occupancy and an 8% jump in price/ bed, reflecting its strong exposure to the popular Caribbean (44% of hotels in portfolio) and the Western Mediterranean region (28%). Robinson has, however, felt the pain of the under-occupancy costs in Tunisia (15% of hotels located in North Africa) and the anticipated lower demand for Turkey. The Cruises segment (€40m of EBITA vs €18m in H1 15, including profits from the JV TUI Cruises) benefited from the strong start of Mein Schiff 5 in July 2016 (booked load factor of 85% in H1 16) launched in June 2015 and the refinancing of Europa 2 (€5m benefit). The Specialist Group posted a €18m EBITA loss (flat yoy), which was contained by the exclusion of PEAK losses in 2014/15 (exit from the strategic venture in Summer 15).
17 May 16
Disposal of the Hotelbeds Group for €1.2bn
A strategic move, above all TUI Group announced the sale of its platform company, the Hotelbeds Group for €1,191m, to the private equity house Cinven. The disposal was on target by the TUI Group which had already announced a carve-out of the business as part of its FY15 results for strategic reasons (different business models and strategies between the online platform and TUI’s Tourism business). TUI Group will remain focused on hotels and cruise ships while cutting back the online booking operations which proved difficult in the light of the hefty competitors including Booking.com or Expedia. Proceeds will be dedicated to investing in future growth opportunities and to strengthen TUI’s balance sheet. The disposal is due to be completed by the end of September 2016. The growth potential of the business is behind the fair transaction multiple The Hotelbeds Group offers hotel rooms to c.31k B2B online and traditional travel agencies and airlines, benefiting from c.72k hotels in its catalogue. The deal highlights a P/EBITDA multiple of 17.3x which reflects the strong trading which characterised the business in FY15. The division recorded a 26% and 18% rise in TTV (Total Transaction Value) and room nights respectively in FY15 and showed €1,059m of sales and €69m of underlying EBITDA. The Hotelbeds Group has a limited 6% market share, but it stands as a scalable business within a very scattered and growing market which offers consolidation potential.
28 Apr 16
On good track to meet demanding FY15 targets
TUI Group’s Q3 15 results revealed a strong growth in underlying EBITA (+18% yoy excluding Easter's timing and FX) despite headwinds from Tunisia (terrorist attacks in June, €10m impact on EBITA in Q3) and the continuing uncertainties in Greece (macro and political issues). However, the group warned about €25m of fallouts in the Q4 15 earnings. Travel warnings have forced the group to suspend its holiday programme to Tunisia which has been redirected into alternative destinations. Growth seen in the Source Markets operations for summer 2015 (+1% in bookings, +2% in prices) was driven by a strong UK market which showed improved load factors and margins and which made up for the highly competitive German market. The latter forced TUI Group to endorse an investment push in distribution as a response to continued margin pressure. Western Europe suffered from a tough French market, despite continuing restructuring measures, and which was impacted by continued reluctance towards North Africa while Belgium was penalised by the delay of an aircraft in entering service (€4m impact). Hotels & Resorts (+€22m in underlying EBITA in Q3) were fuelled by the strong RIU hotels (revenue/bed +15% yoy) which experienced popular Caribbean and long-haul destinations. Robinson increased capacities by 4% yoy in Q3 (opening of new clubs) while Iberotel showed a 10% rise in revenue/bed, partly attributable to an improvement in Egypt. Hotelbeds delivered €6m of EBITA improvement resulting from a 20% rise in transaction value. Cruises recorded a €21m rise in EBITA, benefiting from the ownership of Europa 2 (formerly owned, €4m impact) along with the contribution of the newly-launched Mein Schiff 4 (in June 2015, Mein Schiff 5 is due to be on sale in 2016 with strong bookings for next year so far) which contributed to €7m of incremental EBITA (out of the expected €25-30m per year). The turnaround of Hapag-Lloyd Kreuzfahrten is also paying off with a €10m EBITA improvement yoy backed by sustained bookings (yields stand above €500/bed/night).
14 Oct 15
Encouraging operating trends after positive H1 15 results
Our positive sentiment on the stock has been confirmed by the H1 15 figures posted last month. The summer 2015 trends were encouraging (+2% in bookings, +1% in ASP) with a strong UK (+6% in bookings ahead of the 4% rise in capacity, flat prices) and Benelux (+2% in sales, despite a challenging French market, particularly to destinations in North Africa). Unique offerings confirmed their success with +5% in bookings across all source markets (up to +17% in Germany). Source markets improved its operating loss by €6m on the back of strong Northern and Western regions which partly offset the dull Central region, hampered by margin pressures in the Canaries. Cruises experienced a €13m rise in profitability (€29m of EBITA, excl. financing for Europa), driven by the launch of Mein Schiff 4 in June for the TUI Cruises division (50/50 JV held with the US shipping company Royal Caribbean Cruises) while Hapag-Llyod Kreuzfahrten (100% held by TUI Group) was announced as on track to reach break-even in FY15 helped by the acquisition of the cruise ship Europa 2 (which is expected to bring c.€20m of incremental EBITA based on full-year operations). The Accommodation wholesaler division (to become ‘Hotelbeds Group’ under the group’s new structure) has also reported a 28% rise in Total Transaction Value for summer 2015. The group’s underlying operating loss was reduced by 14% LFL to €306m. The group reiterated its FY15 guidance of 2-4% of sales growth and 10-15% growth of underlying EBITA.
18 Jun 15