Tourism Holdings assets 'undervalued'

Tourism Holdings' assets include Waitomo Glowworm Caves. Directors recommend shareholders wait for the independent appraisal report. Photo

The underlying assets of takeover target Tourism Holdings are worth substantially more than where its share price is trading, says Forsyth Barr head of research Rob Mercer.

"But then the operating performance has been very poor and people have lost confidence in the business model and it's created an opportunity for someone to look at buying it at a discount to its underlying asset value," Mercer said.

The net tangible asset backing was about $1.30 a share, he said.

"A lot of the shareholders will still be well out of the money in terms of where they've invested in the past," he said.

"It's a company at the moment that is not earning anywhere near its cost of capital and has got a history of not being able to do it consistently so that's why it's trading where it is."

New Zealand registered Ballylinch LP last week said it intended to make a partial takeover offer at 67.5c a share for 40.85 per cent of the shares it does not already own.

Tourism Holdings' assets include Waitomo Glowworm Caves, car and motorhome rentals in Australia, NZ and the US, motorhome manufacturing in Hamilton, and Kiwi Experience backpacker transport.

The company's share price was 60c the day before news of the partial takeover and closed yesterday at 74c.

Ballylinch owns 19.1 per cent of the company and the partial takeover was conditional on getting more than half the voting rights in Tourism Holdings.

A substantial security holders notice dated Thursday last week said Ballylinch had bought its 19.1 per cent stake in Tourism Holdings from Sterling Grace Capital Management, Field Nominees, John S Grace and Sterling Grace International for a total of $11.2 million.

John Grace, director of Ballylinch's general partner Ballylinch General, said he expected the offer to be well supported by both large and small shareholders.

"In particular smaller shareholders, many of whom may hold uneconomic or small parcels, will have the opportunity to sell their shares at a premium price without incurring brokerage costs," Grace said.

NZX-listed Tourism Holdings yesterday appointed Simmons Corporate Finance to prepare an independent adviser's report.

Tourism Holdings' directors have recommended shareholders wait for receipt of a target company statement, including the independent appraisal report, before making any decision about the offer.