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The missing link

Tim Boreham
Friday, March 01, 2019

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Sealink (SLK) $4.10

Still on a travel theme, official numbers showing a sharp drop in the inbound tourism trade should mean choppy waters for Sealink, operator of nautical delights such as Captain Cook Cruises and the Murray Princess paddle steamer.

But Sealink’s half-year numbers this week showed the company in shipshape form, with earnings rising 15% to $13.1m.  That’s just as well, given management had promised a better performance in 2018-19 after an acquisition dragged last year’s earnings down 18% to $19.6 million.

In its five-year listed life, Sealink has regularly made headlines not least since it once boasted Lucy Turnbull as deputy chairman (she resigned in 2015 just weeks after hubby Malcolm snared the PM’s job).

Sealink has been a keen route acquirer but has been careful to balance the tourism-dependent business with commuter and cargo transport services.

The biggest local ferry operator with a fleet of 83 tubs, Sealink operates three Sydney Harbour routes and recently started the Manly to Barangaroo service. The company has pitched for the contract to operate Sydney Ferry’s 32-vessel fleet, which was worth $800 million when the current operator won the deal in 2012.

 “Sealink’s … balance between its tourism and transport operations has helped to create a resilient earnings base in a more subdued stage of the domestic and international tourism cycle,” says CEO Jeff Ellison.

That’s not to say Sealink has been quiet on the tourism side, last year buying Fraser Island’s passenger and vehicle ferry and the island’s Kingfisher Bay and Eurong Beach resorts for $43 million.

 Sealink also won the mandate to operate a service to the wilds of Bruny Island in Tasmania and started a service to Rottnest Island (much to the chagrin of the two existing operators, given Sealink undercut fares by 30%).

On the flip side, Sealink now faces competition on its mainstay Kangaroo Island route, after KI Connect started operating a high-speed catamaran in June last year. So far, Sealink reports no effect on its own sales but losing a monopoly position tends to be unhelpful in terms of maintaining margins, to say the least.

Sealink has less to worry about, with a $5 billion proposal, championed by Nick Xenophon’s SA Best, to link the island to the mainland with a 14 kilometre bridge.

As the island’s mayor muses, the plan is viable, if an extra 3 million visitors a year were willing to pay $100 each in tolls.

In the meantime, Ellison plans to jump ship after 28 years with the company, 21 years at the CEO helm.

Ellison will hang around until the October 2019 AGM, so there’s plenty of time to rope in a new salt.

In the meantime, keep scanning the shipping news for resolution of the NSW ferry tender before the state’s March 23 election.

tim@independentresearch.com.au

Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

Published: Friday, March 01, 2019


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