A lot of what Puffy says about TCG is correct. All the IT Operators struggle with how to make money in the Winter and Egypt offers most of what the clientele wants. Trouble is they are also put off by bombs and bullets. It is a global problem that I saw first hand 2 weeks ago when I stayed in the #1 tripadvisor hotel in Sharm and it was 2/3 empty. That said, the TCX flight was 100% full, so they are doing something right. Winter sun, without crossing the Atlantic is a big issue and Cape Verde, Gambia etc. will not plug the Egyptian hole. The increase in long haul traffic will help as people become accustomed to the 10hr flight time to the Caribbean. The popularity of these destinations grows each year and TC are going for it with increased number of flights and holidays. Manchester is growing quickly and the competition is less fierce than Gatwick, where it is becoming difficult to have an impact. Looking at this from the inside, they are doing a lot of things correctly, but as an organisation, there is a lot more change needed. Its a slow process, but I think it will come good in about 3 years time.
I read your 14:13 post with interest. I've a couple of quick questions, points, and would welcome some comment if you have time. 1) Regarding Egypt. How long does TCG "lock into" arrangements with hotels? Seems to me that problems have persisted for some now, so why the capacity? 2) Flights/holidays from Manchester. Some routes no longer available from the south, Gatwick which has great transport links (by car, coach, train and air) seems to me an easier "sell" to half the country (and any near-by Europe) appears to be getting sidelined. Why? 3) City-breaks etc. It's only a flight, hotel and taxi; surely anybody interested in culture can organize a couple of days away themselves? Sadly, I do asume a "city breaker" isn't just off to get p*****d away from home. Thanks for reply in advance.
I do also think there is an outside reason why shares not going up despite fairly promising results. Looking at Ezj, tui, their price have also not moved up for some time. There are some good news in media re airlines and travel companies but yet to reflect on sp. let's hope it will pick up in autumn.
Its peak holiday season so seeing the price low is annoying tbh. I think they are losing out to an extent to holiday property owners in the Med, booking their own holiday villas especially to Spain and Majorca such as this ; www.orangesun.co.uk
These types of sites offer cheap alternatives if booked in conjunction with Ryanair/Easyjet flights. Also, I have noticed that there are many airport transfers websites cropping up nowadays offering cheap airport transfers such as : http://www.hopparide.com/
So, holidaymakers can find cheap holiday accommodation, cheap flights and now, more easily, cheap holiday airport transfers.
In this way package tour holiday operators need to be flexible in what they offer as an independent travellers can do everything themselves with a little work. TCG maybe can do a little more in this respect imo.
It feels like the summer holiday doldrums at the moment to me!
Ignoring the figures for now (I'll get back to them), a huge part of the investment thesis here is to get rid of the low margin products like bucket and spade, Magaluf fests etc.
The change in product mix is showing an adverse change in revenue growth, and I hate changes to top line growth, but on this occasion I am sympathetic as to why growth is down (and also because of Egypt, Egypt will be less of a dependency going forward).
As part of the yield management strategy the higher margin and the harder to sell holidays are more proactively advertised and sold earlier in the year to ensure they aren't sitting on the shelves when the lates market campaigns start, so they don't have to discount the good stuff where the dough is made.
This change in product mix will eventually make up for
a) loss of revenue experienced now b) increased margins which we are seeing now c) winter bookings (which we are seeing now, Barbados, Cape Verde, direct flights from Manchester and so forth will attract new segments)
The change in product mix and less dependency on just a few countries, less 1980s style package holidays, more city breaks etc.
Back to figures.
Revenue for FY14 is likely to fall short of consensus. Even if 2014 is flat on 2013, this wouldn't be so bad as 2013 was a strong year.
Very positively is that TCG has managed to turn a very decent profit out of the revenue that does come in.
From 2015 we will see much stronger and consistent revenue growth due to change in product mix.
I still have:
FY15 Rev 9.9bn EPS 16 P/E 7.7
FY16 Rev 10.3bn EPS 20 P/E 6.2
FY17 Rev 10.5bn EPS 24 P/E 5.1
So at these prices on a forward looking P/E it is very cheap.
Try to note the ratings in a private rating-list. If it's up to date, the last statement from Oriel is a "Buy" from May 13th, with a target of 200. So the reiteration from today should reitarate both: "Buy" and "200".
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