Domestic tourism stocks ready to hit the road

Sealink is one of the best known, but a string of listed domestic tourism companies are set to shine.

A reopening of international tourism will be the potent earnings swing factor for Sealink. Picture: Elisa Herdman

Ahead of The Great Reopening – terms and conditions apply – investors have been pre-emptively piling into the travel and tourism faves such as Flight Centre, Webjet and Qantas.

There’s nothing wrong with that, especially given the travel agents have a heavy presence in offshore markets where the malevolent virus is being treated as a mere inconvenience.

On October 1, Scott Morrison announced that Australia’s international borders would be open to vaccinated travellers from November.

As it happens, the decree applies to Australian citizens and permanent residents returning home, with a decision on allowing tourists slated for “further down the track”.

So despite Qantas chief Alan Joyce’s enunciated flight timetables, one has to doubt when the walls of fortress Australia will really come a-tumblin’ down.

Because of that, the pure-play domestic tourism operators would seem to be the safer bets.

Sealink

Strictly speaking, the ferry operator barely deserves a mention in the pantheon of domestic tourism because of its broad expansion into scheduled commuter services, including bus routes in Singapore and London.

But Sealink is perhaps still best known for its foundation Kangaroo Island ferry hop and its ownership of Captain Cook Cruises. The company also owns Brilliant Travel and the Kingfisher Bay Resort.

In 2020-21 Sealink gleaned $702m of its (record) revenue of $1.17bn from its Australian bus routes and a further $255m from international bus franchises. So landlubber transport accounted for 82 per cent of total turnover, with marine and tourism accounting for the remainder ($215m).

But the latter division is far more profitable, operating on a 24 per cent margin compared with 15 per cent for international buses and 13 per cent for the local ones.

The transport routes are underpinned by solid long-term government contracts, which is great. But a reopening of international tourism will be the potent earnings swing factor.

Sealink’s tourism routes did quite well, at least in between lockdowns and especially in Queensland. The Hayman Island service was added a year ago while Sealink also services Bruny Island, Magnetic Island and North Stradbroke Island, among others.

Sealink this month dipped out on a 10-year $2.3bn Melbourne bus contract, but Macquarie Equities cites $4bn of tendering opportunities in Singapore alone.

Sealink is also waiting for a decision on Region 9, which sounds like an alien-infested part of New Mexico but is actually a Sydney bus franchise covering the eastern suburbs.

Apollo Tourism and Leisure

As could be expected, the lockdowns have badly affected the camper van group’s rentals, with bookings tanking to 5 per cent of pre-pandemic sales.

Apollo’s revenues in the 2020-21 year fell 20 per cent to $293m and the company reported a $18m loss.

But things are never quite so simple in the pandemic era. The biggest campervan fleet owner in Australia, Apollo also makes them and is surfing a boom in van ownership (not all of it from grey nomads).

Apollo’s Australian rental income of $26m was eclipsed by $27m from the sale of ex-fleet vehicles and $177m from new RVs (made at the company’s Brisbane factory).

Apollo also enjoys the advantage of diversification, with its 1100-strong local fleet supplemented by 700 in NZ, 600 in the US/Canada and 300 in Europe/UK.

Experience Co

Strap yourself in: the adventure operator is girding for a powerful domestic tourism recovery with its $47m cash-scrip acquisition of Trees Adventure, the biggest provider of ziplining and rope course facilities at 14 sites in five states.

The purchase is a chunky addendum for Experience, which is best known for tandem skydiving across 17 locations here and in NZ.

In April Experience shelled out $4m-$5m for Wild Bush Luxury (owner of the Arkaba Walk and Homestead in the Flinders Ranges and Bamurru Plains in Kakadu) and Tassie’s Maria Island Walk.

Experience on October 4 finalised the institutional stanza of a $55m raising at 33c per share, with the retail component due to close on October 19.

The Trees Adventure purchase is ambitious size-wise, but unlike first-time abseilers investors should not be too concerned as it looks to be within management’s comfort zone.

Trees Adventure last year made a proforma earnings before interest tax, depreciation and amortisation of $7.3m.

Camplify

Best described as an Airbnb for road warriors, the Apollo-backed Camplify listed in June this year.

The platform hooks up RV and caravan hirers with owners, which is a neat idea given the vehicles sit in the driveway for most of the year (even in non-pandemic times).

Apollo still owns 17.8 per cent of Camplify, which generated $8.4m of revenue from 30,600 bookings in the 2021-21 year (with an average booking value of just over $1000).

Camplify lost $2.1m in 2020-21, an improvement on the previous $2.3m deficit. Management promises a year of “growth and scaling” but no word yet on when the company will be in the black.

In the meantime, Camplify shares trade at well over the $1.42 a share issue price, so investors in the IPO should be happy campers indeed.

Tim Boreham edits The New Criterion.

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