Sealink Travel Group: Is it the sailing season for this one?
Oct 07, 2015 | Team Kalkine
Acquired Transit Systems Marine business:
Sealink Travel Group Ltd (ASX: SLK) reported an acquisition of Transit Systems Marine business including its Stradbroke Ferries for $125 million during last month. The group placed over 16 million shares of SeaLink at a price of $2.50 during September 2015 in ASX at a 3.5% discount to the 10 day VWAP. The group intends to provide qualified shareholders to get further shares of up to $15,000 each through a non-underwritten share purchase plan and raise a further capital of $16.9 million. Meanwhile, SeaLink would improve its fleet of vessels to 60 from 27 post the acquisition, transport around 6 million passengers per annum and have approximately 900 staff across six regions. The pro forma EBITDA is estimated to double on a full year basis to $37.8 million as compared to SeaLink standalone EBITDA of $18.6 million in FY15. Basic earnings per share is estimated to rise by 42% to 17.7 cents on a pro forma basis while net profit after tax is estimated to increase to $17.5 million against SeaLink standalone $9.6 million in FY15. SLK estimates this acquisition to be accretive by next financial year.
Transaction Highlights (Source: Company Reports)
Core segments growth drove FY15 performance:
Sealink Travel Group reported an operating revenue of $111.3 million in fiscal year of 2015 as compared to operating revenue of $103.8 million in prior corresponding period (pcp), driven by solid performance across its core segments - SeaLink South Australia, Queensland as well as Captain Cook Cruises coupled with SeaLink Northern Territory full year operations. Accordingly, SLK improved its EBIT margin to 13.3% in FY15 during the period against 11.9% EBIT margin in FY14. SLK witnessed a 21% surge in underlying net profit after tax of $9.6 million (before acquisition costs) in fiscal year of 2015 against prior corresponding year. Sealink’s online sales revenue mix continues to grow leading to decrease in operating costs. Meanwhile, the group reported an 8% year on year (yoy) increase in fully franked final dividend to 4 cents per share.
Fiscal year of 2015 performance highlights (Source: Company Reports)
Segments highlights:
SeaLink South Australia’s business revenues rose by 3.4% yoy to $54.0 million, driven by better traffic flow to Kangaroo Island coupled with enhanced touring and accommodation package sales. Tourism revenue soared 12% yoy while ferry passengers rose by 2% yoy during the period. The segment’s online reservations sales revenues generated outstanding performance by rising 25.1% on a yoy basis. Meanwhile, SeaLink bought two new Scania coaches for Kangaroo Island Tours and added two vehicles for the segment’s Kangaroo Island Odyssey business. As per the Captain Cook Cruises highlights, segment’s revenues rose 3% yoy to $42.5 million in spite of poor weather conditions in April and less major events in Sydney against FY14. Meanwhile, Sealink added one new rocket ferry named Violet McKenzie, acquired Palm Cat Maggie Cat for $6 million during April 2015, as well as built Beatrice bush and mobile ferry wharf. SeaLink is also upgrading its PS Murray Princess. With regards to the SeaLink Queensland or Northern Territory highlights, the Northern Territory sales revenue rose by $0.7m against pcp, while the segment incurred $0.8 million on vessel repairs and maintenance leading to a decrease by $0.3 million of contribution before corporate allocation. Meanwhile, the group signed a new Tiwi contract for additional four years during last year December to leverage the improving tourist market. SLK released a new Tiwi island adventure tourism packaging and sold pacific cat as a part of its Townsville upgrade program. The group also acquired palm cat ferry for Townsville and finished the new palm island pontoon project.
Stock Outlook:
The shares of Sealink continue to be bullish and generated over 124% returns since its IPO in ASX and posted a solid year to date returns of over 68%. Management estimates a better outlook for international tourism during the fiscal year of 2016 leading to further demand for its leisure products. Accordingly, SLK intends to focus on higher margin international tourism space by using the extra passenger capacity from its present services. Sealink’s acquisition of Transit Systems Marine would also boost SLK’s capability to compete with major scale marine transport business in Australia and abroad. We believe that Sealink remains at attractive valuation despite trading at higher levels, given its further growth potential and improving addressable market. The group also has a modest dividend yield of 2.3%. Based on the foregoing, we reiterate our “BUY” recommendation on the stock at the current price of $3.480.
AU
CA
NZ
UK
US
IND
Acquired Transit Systems Marine business:
.png)
.png)
Please wait processing your request...