Travel is the core segment of the company contributing ~90% of the revenues and 60% of the EBIT (Refer Exhibit 4). Thomas Cook operates across geographies in the leisure outbound, leisure inbound, DMS, domestic and corporate travel. Domestic travel is fragmented industry and has been growing at 20-25% every year (this momentum is expected to continue); the company operates in the domestic travel industry under two brands SOTC and Thomas Cook (acquired rights for using the brand in India, Sri Lanka and Mauritius). It also operates outbound business in Hong Kong...
Thomas Cook (India) or TCIL reported a good set of numbers for 3QFY19 backed by operational improvement. Financial reporting got further simplified and Sterling too performed better than expectation. Consolidated revenues (travel + forex + Sterling) increased 9.4% YoY to Rs15.6bn and were in line with our estimate. Reported EBITDA increased 45.9% to Rs420mn and was also in line with our estimate. EBITDA margin for the quarter stood at 2.7% vs. 2.0% in the same period last year. DMS business turning profitable and the absence of other one-off costs this year led to margin improvement. We expect the margins to continue improving on YoY basis as there remains seasonality in the business. PBT improved 42.4% YoY to Rs216.4mn as margin increased 32bps to 1.39%. The margin looks small because the travel segment...
Moving in the Right Direction; Retain Buy Thomas Cook (India) or TCIL reported a mixed performance in 2QFY19 with the travel and forex business showing good revenue growth, while margins and Sterling's performance was disappointing. On like-to-like basis, consolidated revenues increased 13.8% YoY to Rs15.9bn and were in line with our estimate. EBIT improved to Rs61mn profit vs. a loss of Rs177mn in the same period last year. PBT improved from a loss of Rs399mn to a profit of Rs112mn. The reported numbers are not comparable YoY. While the company beat our revenue expectations, we were disappointed by slower-than-expected recovery in travel margin. TCIL posted operational...
Simplifying Financials: Focus On Improving Margins & Growth In FCF We have presented here a review of key events that impacted Thomas Cook (India) or TCIL's performance in FY18 and its outlook for FY19 based on a close reading of its annual report for FY18 and discussion with the management. The management took a decisive step by deconsolidating Quess Corp before its final spin-off in 2019. Thus, starting FY19, financial reporting is now much simplified with respect to core travel, forex and vacation ownership businesses, as earlier it was overshadowed by Quess Corp. Corporate restructuring is underway, which should further simplify the group structure. After the transformational...
Tailwinds in Travel; DMS Improves; Fx Steady; Risk-Reward Favourable We interacted with the management of Thomas Cook India or TCIL at the Institutional Equities Conference hosted by us last week. The active participation of TCIL's management was encouraging. Overall, the conversation was positive and a few investors also appreciated the simplified financial reporting for 1QFY19. The management highlighted key measures undertaken in the recent past which are now beginning to show results in terms of rising margins. Value unlocking with respect to Quess spin-off took centre stage as the growth outlook looks convincing. According to the current market...
Thomas Cook (India) or TCIL is an asset-light, high-FCF and RoIC business growing in midteens on the back of constant product innovation and diversified revenue streams. We believe TCIL is a long-term compounding story and thus initiate coverage on it. At the current stock price, the market has ignored the legacy travel and forex business which continues to grow well. Secular growth in tourism backed by improving disposable income, stable economic growth and efficiency gains should increase revenues/EBIT by 15%/34% CAGR, respectively, over FY18-FY21E for travel, forex and vacation ownership business. Additionally, the company's reasonable acquisition track record while maintaining a rock-solid balance sheet is a free option at this price. We expect the stock to continue its upward march and have...
Event - Restructuring of business to simplify holding structure: The Board of Thomas Cook India (TCIL) has approved corporate restructuring exercise where travel and related businesses, such as leisure travel services, foreign exchange, destination management services (SOTC) and vacation ownership business (Sterling Holidays) will be part of TCIL...
Thomas Cooks (TCIL) board has approved the proposal of a corporate restructuring exercise that would enable the company to focus on Travelrelated businesses and give its shareholders direct exposure to Quess. The contours as well as the timeline of the deal are yet to be disclosed.
Q3 sales grew 51% YoY to Rs 30 bn. Overall EBIT margin improved 130 bps YoY to 2.9% on better margin in travel (+260 bps YoY), HR (+30 bps YoY), and VO (swing from loss to profit). Forex continues to disappoint; sales declined 11% YoY
Thomas Cook India is not an investment, it is strategic. We invested in Thomas Cook with a view that its future cash flow can be used to purchase further investments in India. Thomas Cook will look for companies run by great management teams that are good clean businesses, run for the long term.
