The Engelberg-Trübsee-Titlis ski lift company, operating in central Switzerland near Lucerne, is a very small company that is not widely followed by financial analysts.
A tiny company, active in a banal field and which does not interest institutional investors... here are already 3 interesting characteristics which deserve to be looked at a little more closely!
First observation:
The equity ratio has been increasing steadily for years and currently even exceeds 80%. We are therefore dealing with a healthy company that is not about to file for bankruptcy:
Among the main assets of this company, we note that, unlike many others active in the same field, it attracts tourists both in summer and in winter.
The cash flow is strong and the valuation is reasonable (notably lower than that of Jungfraubahnen or BVZ).
The net profit margin (in red) and the ROE are quite high, even if unfortunately we see a rather erratic evolution:
This ups and downs trend is mainly explained by exceptional/non-recurring gains in recent years linked to the sale of apartments.
Other major risks for Titlis are:
- a decline in the number of visitors (foreign tourists do not appreciate the strong franc or the attacks in Europe),
- a great dependence on Asian tourism,
- regular investments necessary to maintain or modernize the facilities.
The dividend (in blue) is growing steadily, but growth is rather modest and the dividend has even stagnated over the last two years. Earnings per share vary quite significantly due to the non-recurring factors discussed above. However, dividend coverage is not currently a concern:
Titlis Bergbahnen is not as Swiss-oriented a stock as one might think at first glance, given its heavy reliance on foreign tourism.
Furthermore, the stock is relatively illiquid and the spread is quite wide (reaching 1 to 2% on some days).
Conclusion:
The stock is currently trading at 380 francs.
The PER for 2017 is estimated at 13 (in comparison, 19 for Jungfraubahnen). The PER 2016 is 20.5, but due to exceptional charges.
Despite the risks outlined above, the current valuation is very attractive. I calculate a reasonable current price of around CHF 400 and a target price of around CHF 450-480 within 24 months, which is a fairly interesting but not extraordinary potential gain.
The dividend of just over 2% is not, however, interesting for an investor focused on passive income.
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Thank you dividinde for this analysis. I also find that it is a nice title that enjoys a monopolistic situation like JFN and VBZN. Can you specify what is the nature of these exceptional charges in 2016?
Personally, I have a big weakness for VBZN, which I find exceptional in every way.
2016 was indeed a bad year for Titlis, with on the one hand abnormally low income and on the other hand various exceptional expenses.
In terms of financial income, the group suffered mainly from a sharp decline in Asian tourism following the terrorist attacks in Europe and from changes in Chinese visa regulations.
On the expense side, abnormally high maintenance costs and exceptional depreciation were recorded in 2016 (in particular due to the opening of the new Titlis Xpress gondola lift in December 2015).
The year has started well for Titlis and the exceptional items mentioned above will no longer weigh on the 2017 financial year. This is why the estimated PER for 2017 is more representative than that of 2016.
Ok thanks. It's true that it's interesting. I find the general liquidity ratio a little low, barely more than 1, but otherwise it's a great company. A franchise as our dear Buffett would say.
You have piqued my curiosity about BVZ. Are you planning to write an article about it?
If dividinde doesn't do it I will do it myself because I really like this title.
Jungfraubahn, Titlis and BVZ have had very good performances in recent months. For my part, I am a satisfied shareholder of Titlis, I have long had a real fascination for this superb company.
I didn't intend to write an article about BVZ, so I'll happily leave the pen to my brother. Maybe Jérôme will manage to convince me to become a shareholder of BVZ... 😉
Wait, we'll have to see if the reasons that guided my purchase are still valid. But I promise I'll analyze it soon.
As for Jungfraubahn, I sold it last year with a capital gain of 3 figures, but I don't even remember how much because it was so high 🙂
On reflection, regarding the BVZ analysis, I will wait for the publication of the annual results this spring, to have a more up-to-date picture.
Titlis has been battered in 2019. What to make of its situation? Buying window for 2020? Or falling knife?
I remain positive on the stock because the company is healthy and profitable. From a value point of view the situation is also interesting. I do not imagine the stock falling much more, on the other hand it is difficult to estimate the upward potential because it will depend a lot on the evolution of the profit in the coming years.