Key points
- The lower Australian dollar, which will help in-bound tourism, is an important tail wind to Amalgamated Holdings’ collection of leisure and accommodation assets.
- It has a no-nonsense managing director in David Seargeant.
- Tribeca Investment Partners’ valuation sits at around $14 but if the A$ were to fall further, this may well go up.
David Aylward is managing director and portfolio manager at Tribeca Investment Partners.
What do you like about it?
Amalgamated Holdings (AHD) has a fairly diverse range of business units, each of which we see as being competitively well placed within their sector, either through being a market leader, or operating as a significant and innovative player within a market niche. The large film exhibition business is specifically benefiting from a more appealing crop of content that has got people going back to the movies for a night out. Within the hotel brands, there are some new offerings within the suite of brands coming online and we think these will be well received. However from a more macro perspective, the lower Australian dollar will positively impact on in-bound tourism and we see this as an important tail wind to Amalgamated Holdings’ collection of leisure and accommodation assets. Finally, the recent blast of cold weather we have had should benefit this firm’s investment in the Thredbo Ski Resort.
How is it better than its competitors?
Being something of a mini conglomerate, the answer here differs from business to business. However, as an overriding observation, it is the combination of keen property acquisition, management and development skills that are combined with a very customer centric understanding of what is expected in the offerings that are ultimately taken to the market. A key example of this is the way they have skewed the cinema offering towards a premium experience.
What do you like about management?
David Seargeant is a fairly no-nonsense Managing Director. His tenure in the position is quite long and in this instance, we like the experience this brings in allocating capital across, and leading, a somewhat diverse range of brands. Importantly, the team working with David has demonstrated a keen understanding of their various customer sets.
Price target
Our valuation sits at around $14 but if the A$ were to fall further, this may well go up.
At what point would you sell?
Beyond significant price appreciation beyond our valuation, there is an element of key person risk among the very senior executive team so material changes here would be cause for concern.
How much has it added?
The stock has added 23 basis points to portfolio performance in excess of the market over the last 12 months.
Is it liquid?
Liquidity can be an issue as it is quite tightly held. That said, with a patient approach and realistic price objective, stock can be moved.
Where do you see value?
It is a stock that tends to fly under the radar a little. While they are clever with their branding operationally, they don’t focus too much on promoting the stock price. We like that and it means that as results continue to be posted, the stock price will be rewarded for consistent growth. We believe much of the untapped value lies in the fact that most of the hotel assets are in the books at cost. With well-targeted reinvestment, the real worth of these assets is likely considerably greater than is indicated in the accounts. Finally, there is an attractive dividend yield that is covered by cash earnings.
Amalgamated Holdings (AHD)
Source: Yahoo!7 Finance, 23 July 2015
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