Tallink invites investors to a presentation in Turku on 23 September 2019. Seats are limited. More information and registration at www.tallink.com/investors
#Tallink passenger volumes decreased by -1.7% in September compared to the reference period, when we expected slight growth. In Q3, growth was 0.9%, when we predicted about 1.8% growth.
In freight, Q3 saw a 1.7% decrease compared to the reference period, which was close to our forecasts.
Due to a slight volume disappointment, there is some room for a downward revision in our forecasts, and we will update them before the Q3 results.
It came to mind whether there will be any unpleasant dividend taxation surprises if I buy this for a stock savings account. Has anyone already looked into this? I thought I’d check before asking elsewhere.
My understanding is that a 15% withholding tax remains in the company’s home country on dividends distributed by Tallink, and in an equity savings account, the withholding tax remains a loss for the investor. This is because it is not credited in the taxpayer’s final taxation in the same way as with a regular book-entry account. There are certainly various exceptions to this as well.
Yeah, thanks. I suspect the same, because it happens in the way you described, for example, with SSAB and Telia. Maybe I’ll still check with the tax authorities directly, in case some loophole happens to be found
In our opinion, the company combines a defensive business nature, a moderate risk profile, and improved earnings growth prospects, in relation to which we believe there is room for appreciation in valuation. However, the business is capital-intensive and requires continuous investments, and return on capital figures in the industry have historically not been very profitable. Stable business operations, a leading market position, an efficient fleet, and a strong balance sheet form the basis for a sustainable dividend stream.
The company’s strategy is to improve its financial position and dividend payment capacity through growth in passenger and cargo volumes and increased efficiency. Recent years’ investments in ship concepts and cost-efficiency of operations are starting to yield results based on 2019, which enables reasonable earnings growth in the future (2018-2021e CAGR-%: 6%).
A major risk to forecasts is changes in fuel prices (+/-), but the company’s current and future LNG (liquefied natural gas) vessels and more energy-efficient processes reduce fuel consumption. The company’s business can be seen as defensive when looking at history, as people favor cheaper local trips when the economic situation weakens. In addition, a decrease in fuel prices typically supports the company’s profitability during a downturn, potentially leaving the impact even net positive.
With our forecasts, Tallink’s 2020 earnings multiples (P/E: 13.5x and EV/EBITDA: 7.5x) are, in our opinion, moderate given the company’s current year EPS growth (+10%) and the moderate risk profile of its business. The balance sheet-based valuation (19e P/B: 0.8x) is justified relative to the return on capital (20e ROE-%: 6%), and already provides support due to the company’s liquid and strong balance sheet. The fairly good predictability of cash flows also makes our highly usable DCF model value (1.25 euros) support our recommendation. The company’s stable business, 10% EPS growth (19-20e), approximately 5% dividend yield, and small upside potential in valuation multiples raise the 12-month return expectation for the stock to a good level of approximately 10-15%.
For anyone who is interested, Tallink Grupp management will introduce the results of Q4 2019 on a webinar (in English) on 27.02.2020 at 16:00. Prior registration is required, more details in the stock exchange announcement.
A 6.5% dividend yield doesn’t seem to help amid corona fears as the stock is coming down hard. It’s understandable, because if the virus makes a big landing in Finland, Tallink will be a big sufferer, so there is a lot of uncertainty around this year’s results. Of course, the virus effects are only temporary, so now might be a good time to buy a good dividend stock cheap, the long-term outlook has probably not changed at all.
Once again on a business trip and sitting in the ship’s bar doing empirical “research.” Coronavirus has been heavily in the news in Sweden again, and there are very few passengers on board. According to the staff, about 500 people have canceled their trips.
The “man in the world” forum already reported empirical research results, so Viking Line’s profit warning didn’t come completely out of the blue. Tallink will probably also soon notice that the ship’s dance floor no longer has anyone but staff and truck drivers
At the turn of the month, I organized a trip for about 40 people from Finland and the Baltics to Sweden (for work), and there were no major issues with the ferries. In the Baltics, the control was significantly stricter, and the papers had to be in order. In Finland and Sweden, there were no checks whatsoever. The ferry trip was - let’s say, interesting. Besides my own car, there seemed to be only one other passenger car on the entire ferry, plus a bit more cargo than usual, probably because some of the departures had been cancelled. One cafeteria was open for a while, and the tax-free shop was open for about an hour, everything else was closed.
I expect that once the “restrictions” are lifted, the proportion of business travellers will normalize within a few months, but it will take considerably longer for cruise sales to normalize.
Asians were a significant customer group for Tallink on the cruise side before corona. Already in the early stages of the epidemic, this group disappeared, and eyes turned to the eastern neighbor, but that attempt quickly withered as the epidemic spread and travel restrictions came into force. These will not provide any help in the near future, meaning cruise demand mainly rests on the Finland-Sweden-Estonia axis, and many will surely think twice before going on a cruise on the routes between Finland and Sweden before the situation in Sweden stabilizes.
Route travelers will likely be found much faster, e.g., business trips and family visits.
As I understand it, ticket sales for ships are still restricted, and they are not sold out even if there is demand, although I don’t know if this is the case for all routes.
