Value Investing Lazard's Levelized Cost of Energy Analysis 2019 Report |
- Lazard's Levelized Cost of Energy Analysis 2019 Report
- Corp Governance - Kodak Case Study
- TZOO - travelzoo
| Lazard's Levelized Cost of Energy Analysis 2019 Report Posted: 02 Aug 2020 12:51 PM PDT |
| Corp Governance - Kodak Case Study Posted: 03 Aug 2020 04:11 AM PDT |
| Posted: 02 Aug 2020 10:19 AM PDT TZOO - Travelzoo Current Market Cap: 63.9M Share Price: 5.65 Shares outstanding: 11.5M INTRODUCTION Founded in 1998 by Ralph Bartel, Travelzoo is a niche travel and local deal aggregator/advertiser. The logo appears unchanged since the 1999 internet boom. For two decades, they have published a top 20 list of deals on travelzoo.com. The company works with 2000 companies worldwide and reports approximately 31 million "members". Members are individuals who are subscribed to their email notification service. In early 2020, the company acquired Jack's flight club, an airline deal notification subscription service. Jack's is primarily based in the UK, but expansion to the US is being rolled out. The founder's brother, Holger Bartel, is the current CEO. The company has high insider ownership, relatively low float and a history of share buy-backs. Travelzoo.com Travelzoo revenue is derived from paid listings on the top 20 list and other parts of their website. Advertisers include hotels, resorts, airlines, travel agencies, and regional tourism promotion organizations. They also sell vouchers to various hotels and resorts in a similar manner. The clientele is deal motivated. They tend to do well in off-peak seasons and are able to generate demand when better deals are available. International competitors include Secret Escapes in the UK. From 2016-2019 revenues have ranged from 106M to 111M and income has ranged from 3.53M to 4.66M. Good co. / Bad co. TZOO makes money in the US and Europe and has historically lost money in Asia. The losses from Asia have been hiding a solid US/Europe business. 2019 Net income of 4.1M included losses of 8.1M attributed to Asia/Pacific. The business ex-Asia produced 12.2M. Jacks Flight Club A 60% acquisition of Jacks was completed in early 2020, with an option to acquire the remainder in January 2021. They are a large player in the flight deal alert industry. They scan flight data for good deals and send these out to members. Free membership is available. Members can also pay $49 a year for premium service which provides more prompt deal notification. The service is for deal motivated individuals, similar to Travelzoo's core business. Several competitors exist in this space. The barrier to entry does not appear particularly high, however the niche has already been swallowed by a few major players (Scotts, Jacks, Dollar flight club, and a few others). A simple breakdown of how these deal services operate from someone creating a local competitor: https://www.reddit.com/r/Entrepreneur/comments/bbl35x/how_and_why_im_taking_on_scotts_cheap_flights/ Jacks has a greater than 80% operating margin. 60% ownership would have contributed 2.2M in earnings. By 2/2020 100K UK travelzoo members signed up for the free service US rollout happening Covid-19 and why is there an opportunity? A worldwide pandemic has obviously caused severe adverse effects upon the entire travel industry. Travelzoo's shares accordingly sold off in March 2020. The founder, Ralph Bartel, also incurred a margin call during this time, which placed further selling pressure on the share price. Shares eventually hit a low of $3.04. Shares have since recovered a bit but remain at prices similar to previous multi-year lows. Bye Bad Co. In March 2020, the company swiftly decided to end Asia/Pacific operations. The Japan business was sold to its managing director (with Travelzoo keeping some interest) and the remainder of the Asia/Pacific business was closed. In a normalized environment this would have unlocked tremendous value. Now and forward The company briefly pivoted to favor favoring sales of refundable vouchers which surpassed expectations. The company holds on to these funds until redemption. The flexibility of the deals has helped uptake despite covid-related uncertainty. Since then, they have returned to a historical balance of advertising and vouchers. Revenue has suffered greatly since the onset of the pandemic. Q2 revenue declined to 7M from 26.6M in 2019. Travel fears and restrictions simply limit the amount of people traveling for leisure. Travelzoo has been able to offer tremendous value to its members during this time. Deals to the Maldives, Galapagos islands, and Antarctica have been seen at amazing prices. Most deals extend into 2021 and occasionally beyond. Travelzoo has responded to the revenue decline with impressive cost cutting measures. A large portion of the company's expenses are related to selling/marketing and Travelzoo has been able to react quickly. Furthermore, they have used this opportunity for structural improvements. CEO Holger Bartel recently stated that ongoing operating expenses are expected to be ~60M ( ~88M in 2019) with the ability to support normalized revenue. Cash balance has increased to 27M, partially due to increased voucher sales. They expect return to profitability by end of fiscal year 2020. Valuation Value realization will occur with travel normalization and if the company is able to return to pre-covid business. Expect a sooner return to travel amongst Travelzoo's deal focused customers, however full return is unlikely before 2022. Many deals will continue to be available to Travelzoo customers, as destinations are eager for customers. Pent up demand should help as well. Balance sheet is very manageable. I will use a value with a simple multiple of earnings calculation. Historic P/E has averaged 14. We can use a P/E of 10 for safety. 2019 income, simply excluding Asia/Pacific = 12.2M. P/E of 10 = 122M valuation. (share price = $10.6) Full acquisition of Jacks = + 3M in earnings. 15.2M. P/E of 10 = 152M valuation. (share price = $13.2) (Potential growth for Jacks is not taken into account. This could add real value. However, we should also assume near term impairment. ) Cost cutting of 28M is a large unknown. If this is sustainable, the potential is upside enormous. 45M. P/E of 10 = 450M valuation. (share price = $39) Conclusion Travelzoo revenue is down and shares have sold off. Several structural changes have since occurred, including closure of the money losing Asian business and significant structural cost-cutting. These changes alone should unlock tremendous value. However, this is all masked by the overhanging Covid-19 situation which limits travel. Until this resolves, it is a waiting game. [link] [comments]  |
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