E2-Capital Holdings Limited (formerly: Westminster Travel Limited)

[yan]

Just found it interesting that even though profits and revenues have been increasing steadily, trade receivables have been increasing even more than the increase in revenues.

In fact, AR turnover is less than one. And the amount of trade receivable is more than revenue.

[cyclone]

Westminster Travel is a one-stop travel management and services provider offering a wide range of travel products and services. The Group is principally engaged in the provision of corporate travel services, wholesale of air tickets, hotel rooms and travel packages as well as leisure travel services. The history of the Group can be traced back to 1973 when Westminster-HK was incorporated. Westminster HK is now one of the leading travel agencies in Hong Kong. The Group employs over 600 staff and has offices throughout Hong Kong, Beijing, Guangzhou, Macau, Singapore and Taiwan.

BUSINESS SEGMENTS
1. Corporate travel segment comprises corporate business travel, MICE, corporate leisure travel and the provision of other travel related services and products to corporate travel customers.
2. Wholesale segment engages in sale of air tickets, hotel rooms and FIT (Free Independent Traveler) packages on behalf of our suppliers to our travel agency customers.
3. Leisure travel segment offers a wide range of travel products, including FIT packages, air tickets, hotel rooms and other travel-related products such as travel insurance, amusement parks entrance tickets, cruises, rail-pass etc. to retail customers.


FYear : 2008 : 2009 : 2010 : 2011 : 2012
ROI : 11.6% : 7.2% : 12.0% : 14.4% : 14.0%
NAV : 74.0 : 79.4 : 88.1 : 97.2 : 112.8 (cents per share in HKD)
Net Margin : 17.1% : 10.8% : 18.6% : 19.7% : 20.5%
Average 5 years PE about 6.34.
No dividend declared in 2008 and 2011.
Latest dividend HKD 0.023 ONE-TIER TAX, ex-date on 5 Nopember 2012.
Very illiquid. There are only 44 shareholders as at 19 September 2012.


<vested>

[Musicwhiz]

What is WT's competitive edge? I see many travel agencies in People's Park/Pearl Centre area, and there are also many established brand names like Dynasty Travel, SA Tours, Chan Brothers, ASA and CTC Travel. These agencies also offer tour packages to various destinations, though I am not sure if tours can be customized at these places.

In addition, there is also an outlet called "Price Breaker" which caters to travel bookings and offers cheap deals; and I've seen outlets in Parkway Parade and Marina Square. How effectively can WT compete with these incumbents?

In terms of pricing, how is WT priced? Do they target business travellers, premium holiday-makers or are more low-end, mass market?

Net margins look impressive, but how has the FCF and dividend history been? You did not provide information on sales growth and gross margin growth; and also capital structure. How are they funding growth and what are their plans to grow?

If there are no concrete growth plans and market is fragmented with many players, perhaps the current valuation of about 6-7x is justified?

Just my thoughts. (Not Vested)

[dydx]

Westminster Travel appears to be a well-established and managed business.

Its Corporate Travel Div. is most interesting to me. While profit margin may not be high, all big corporates (e.g. banks, MNCs, etc.) have at least one appointed travel agents to handle their staff's business travels - booking of air-tickets, airport transfers, hotel bookings, etc. - and clearly, there is sustainable high-volume business here. In addition, many corporates now have on-going requirements for organized group incentive travels (both in-bound and out-bound) for staff, distributors/agents, etc., and this is also a high-volume business which requires the travel agent to put many things (including ground transportation, visit to popular tourist sites, shows, etc.) properly together in a package, and execute it well.

As for Wholesale Div., there is always a role for financially stronger and more resourceful travel agents to block-book airline tickets, hotel rooms and even entry-tickets to shows and tourist destinations, and on-sell them including in a packaged form to travellers including through other smaller travel agents.

As for the Leisure Travel Div., foreign established suppliers of higher-end travel services and packages - e.g. cruise lines, land/river tours that cover a few countries (like the pan-European tours by"Contiki", etc.) - will usually appoint more established local travel agents to market and distribute their products. And for FITs with specific travel tastes or requirements, there is always a role for good and established local travel agents who can provide them advice and choices, before they decide and buy a tailor-made travel itinerary, including air-tickets, hotel rooms, rail passes, etc.

[dydx]

Today (5Nov12) is the first market-day Westminster Travel went 'XD' for the HKD0.023/share (approx. $0.0036/share) Final dividend for FY12 (ended 30Jun12), and yet Mr Market chose to reward this counter with a $0.01 gain, with the closing share price at $0.12. Shareholders must be very happy!

But when compared against its latest (30Jun12) NAV/share of HKD1.128 (approx. $0.1792), the last done share price of $0.12 does appear grossly underpriced still. Perhaps it is timely to take a good look into the company by reviewing its latest FY12 AR and corporate website.....
http://info.sgx.com/listprosp.nsf/07aed3...80036774e/$FILE/HAR1207007_E_Westminst(0241)Book%20Ver.pdf [FY12 AR]
http://www.westminstertravel.com/

[dydx]

1H (ended 31Dec12) just out.....
http://info.sgx.com/webcoranncatth.nsf/V...8003ED7B0/$file/HY2013_Results.pdf?openelement
1H's NP edged up only 3.1% to HKD26,645k, giving an EPS of HKD0.095 (approx. $0.015). NAV/share as at 31Dec12 stood at HKD1.204 (approx. $0.19).

A big surprise!: Westminster Travel is paying out its first-ever Interim dividend of HKD0.0928/share (approx. $0.015/share, payable on 12Mar13), and another Special dividend of HKD0.05/share (approx. $0.008/share, payable on 8May13), from its HKD132.3m cash reserves.

Based on the last done (28Nov12) share price of $0.119, the total yield of the 2 dividends will amount to 19.3%. It looks like Mr Market will have to work harder on Westminster Travel, very likely starting tomorrow.

[dydx]

Westminster Travel's share price last done this morning (5Feb13) at $0.16 - it jumped by $0.041, or a whopping 34.5%! - with only 90 lots done so far, but the 'buy' queue is at least 15 times larger than the 'sell' queue.

It is really amazing that it has taken only $14k worth of market capital to raise the share price by so much! It only shows how very under-priced this counter had been before last evening's 1H result announcement!

[psolhawk]

Congratulations to you! Although I believe the comment on 'under-priced' is subjective as there is a large amount of intangibles on the balance sheet which made 12cents/share (the price before the announcements of dividends) a really fair price. In fact, moving forward, Westminister Travel is probably conceding that, as a business, they are running out of ideas on what to do with the cash, hence the issue of the special and interim dividends.

[dydx]

I guess the more relevant point to note is that Westminister Travel continues to grow - both organically and through very selective acquisitions - its Corporate Travel, Wholesale, and Leisure Travel businesses in Singapore. A friend working in the fund management industry just told me the other day that her employer has recently signed up Westminister Travel as their new corporate travel agent, and the services provided are good and responsive.

If the fair price for Westminister Travel is anything close to $0.12, then those who bought the 277 lots transacted yesterday at between $0.145 and $0.165 must be 'nuts'. Obviously, this is not the case here - as I think it is quite fair to say that normally Mr Market would not just over-price illiquid stocks, which by nature would attract more serious and well-funded investors with longer-term perspectives.

Apart from its latest (as at 31Dec12) NAV/share at HKD1.204 (approx. $0.19), I guess in valuing Westminister Travel we should also bear in mind that its IPO (sponsored by PrimePartners Corporate Finance) in Jan2009 was pegged at $0.235/share.

[psolhawk]

Mr Market is mindful of breaching the 'cap' of under $0.17 because that is exactly what is left in the company after paying out the dividend. I wouldnt say that those who are buying now are 'nuts' but they obviously are not giving themselves a fair margin of safety at the point of purchase. I reckon that those who purchased their shares after the dividend announcement merely look at the NAV of $0.19 and did not peruse the balance sheet carefully to identify the intangibles accounting for 34% of their net assets (or approximately 6.5 cents per share). Will a value investor pay for the intangibles by offering more than $0.12 before the dividend announcement? Few may, with deep convictions about the business perhaps. I will guesstimate that most in this forum won't.

and I guess you should concur that past issue price at IPO has no bearing on their current value or worth now.