Camplify Holdings: Mighway and the highway
About the author:
- Author name:
- By Steven Sassine
- Job title:
- Associate Analyst
- Date posted:
- 29 October 2021, 7:00 AM
- Sectors Covered:
- Diversified Financials
- CHL has entered into an agreement to acquire Mighway and SHAREaCAMPER NZ/AU from Tourism Holdings (THL) for up to ~A$7.4m (all scrip).
- The deal sets up CHL to be the dominant P2P RV platform in ANZ, with a strategic relationship with THL also offering additional marketing/revenue benefits.
- We alter our FY22F/FY23F/FY24 EPS by -2-+38% factoring in the deal, stronger take-rate assumptions and higher longer-term revenue growth forecasts. Our price target increases to (login to view) on the above changes.
- We had recently moved to a Hold pending further catalysts post a strong share price performance, however, now with > 10% TSR post this acquisition, we move back to an Add.
Camplify (CHL) has entered into an agreement to acquire Mighway (MW) and SHAREaCAMPER NZ/AU (SC) from Tourism Holdings Ltd (THL). The purchase consideration is up to A$7.37m (pending any final adjustments).
The acquisition elevates CHL to now be the largest peer-to-peer (P2P) marketplace in both Australia and New Zealand.
CHL is now positioned to take advantage of the domestic market reopening as State-based border restrictions ease as well as the return of international tourists to New Zealand (we understand pre-COVID, Australians were 39% of all tourists in NZ, with ~70% opting for self-drive holidays).
A strategic relationship has also been established between CHL and THL, which will see the companies work on growing the Camplify brand and utilising THL’s RV Supercentre’s (RVSC) to manage CHL RV owners vehicles in both Australia and NZ (margin accretive).
In our view, a good addition to the CHL business, allowing it add scale in the key NZ market as well as opening up additional service/revenue opportunities via the new strategic relationship.
Deal summary and thoughts
The A$7.37m consideration represents a paid multiple of 5.46x FY21 revenue, with both businesses heavily impacted by COVID over the last financial year (~A$2.4m GTV in FY21 vs ~A$7m GTV in FY19).
The all scrip deal will be issued in two equal tranches, with the first issued on deal completion (30 Nov) at A$3.34 (20 day vwap) and second tranche issued 12 months post completion (lesser of A$3.34 and 60 day vwap, with floor of A$1.42). Issued shares will be escrowed for 18 months.
The deal will see ~1k RV’s in NZ and 122 in Australia come onto the CHL platform, along with a database of ~2.5k RV owners and an additional hirer base of 10k. In our view, the now 1.4k NZ RV fleet should provide enough scale for CHL to penetrate the ~A$125m GTV market (FY19).
Given MW and SC had ~6% share of GTV in FY19, we anticipate market share for the combined NZ business to broadly double by end of FY23 given:
- Increased fleet size.
- Leveraging THL’s cross-marketing.
- Lower churn rate as dormant RV’s are put to use once tourist activity picks up.
- The flywheel effect once CHL is appointed a dealer (providing owners access to THL’s ex rental fleet and newly manufactured products).
In addition to the managed service product that CHL will now offer its owners via THL’s RVSC’s, the 4 key NZ locations of these will not only open up cross-marketing opportunities but also additional service offerings (e.g. one-way rentals).
Forecast and valuation update
We alter our FY22F/FY23/FY24F EPS by -2%-+38% factoring in the acquisition consideration, stronger take-rate assumptions and higher longer-term revenue growth forecasts given the now dominant P2P market position across ANZ (and additional ancillary service offerings).
Our valuation is derived using an equally-weighted blend of a DCF and relative value methodologies.
Our price target increases to (login to view) on the above changes. We initially moved to a Hold pending further catalysts, however, now with greater than 10% TSR post this acquisition, we move back to an Add.
CHL’s management team has shown an ability to build out a successful, scalable platform.
We continue to like the CHL model, particularly the prodigious growth opportunity both domestic and offshore.
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