Wednesday, January 19, 2022

Stockbrokers Botswana recommends a ‘BUY’ on Wilderness securities

Based on a number of assumptions including growth in tourist arrivals, a local stock broking firm has recommended a ‘buy’ on securities of
Wilderness Holdings, the leading eco-tourism group that trades as
Wilderness Safaris in Botswana and the region. Stockbrokers Botswana said in a research note on the Botswana Stock Exchange listed tourism outfit that with cash reserves of over P251 million, the company sits comfortably and looks set to expand its operations.

“The group has shown interest in the East African region with countries such as Tanzania and Ethiopia identified as potential targets,” the brokerage firm said.

“Kenya also presents good prospects but the country is currently going
through a tough time amidst security concerns in the region; any
pullback in risks from the East African region should serve to see
exponential growth in tourists flowing into the region.”
The firm said its valuation of Wilderness Holdings is based on a number of key assumptions amongst others an estimated average growth in tourist arrivals of 4 percent, a long-term annual inflation of 5.9 percent, dividend cover of 2.0x, risk-free rate of 5.8 percent, an equity risk premium of 7 percent and exit value of 4 percent.

Stockbrokers revealed that for the DCF (Discounted Cash Flow) and DDM (Dividend Discounted Model), it uses a discount rate of 13 percent
(5.8 percent risk-free rate) to derive a Net Present Value from the 5-year forecast cash flows and dividends,” it said.

“We derive DCF and DDM values of 325 thebe and 87 thebe respectively. We recommend the stock as a BUY with a target price of 325 thebe, upside 18 percent.”

Wilderness operates and manages 61 camps in 8 countries, of which 44
are owned outright by the Group, 9 camps managed on behalf of the
owners, and 8 camps are partner products that the group has an equity
stake in. The group downsized its Namibian and Zambian operations, closing the Skeleton Coast and Kulala Wilderness camp in Namibia, and merging the Zambia and Zimbabwe head offices.
“It seems it’s all about scaling Namibia to the appropriate level as
bednight sales have remained flat even with the lower number of
available beds”. However, available bednights have been on a decline
FY2014: 210,880 beds, FY2013: 231,528 beds, FY2012: 244,386 beds, and this has contributed to the increase in occupancy rates to 62 percent (FY2013: 56 percent).

Wilderness operates and markets Safari Consulting, Transfer and
Touring, Camp, Lodge and Safari exploration services, Finance and
asset management. Guests come in from all over the world, but about 60 percent of the market comes out of North America, and the rest comes from Europe and very recently Asia has shown an interest.
It also has a fleet of 42 fully paid aircraft with a book value of
US$12 million for the purpose of transporting guests and visitors to
the various camps and of the P93 million budgeted CAPEX, Wilderness
has set aside 10 percent for the maintenance of the aircraft, and
about 2 percent for the maintenance of the airstrips.

During the year, Wilderness re-built Duma Tau camp in Botswana which
management reports has been receiving rave reviews, boasting an
occupancy rate of 81 percent (FY2013: 74 percent). The group also
opened two new camps, Kashawe in Zimbabwe and Santawani in Botswana.

The group revenues were up 16 percent to P1.4 billion (FY2013: BWP1.2
billion) underpinned by increased demand and occupancy which allowed
for increased rates during the period. The positive impact of BWP
weakening by an average 11 percent against the USD was partially
offset by the 8 percent depreciation of the ZAR/BWP, with income
received in the South African currency leading the pack.


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