INVESTORS IN THE TRAVEL and airline markets are probably not short of investment opportunities, especially in light of an upcoming soccer tournament (more tourism than soccer) in South Africa next year. But most of those are short-term opportunities rather suited to the opportunistic trader instead of investor.
Long-term opportunities lie in innovative and entrepreneurial companies in South Africa’s volatile domestic airline industry. While both listed airline companies Comair Holdings and 1time Holdings are such good opportunities, we have to single out 1time’s business as the one to fly realistic dreams of greater future returns.
1time is a nice mix of maintenance and aviation businesses, as well as a sprinkling of travel business. Its 24,22c headline earnings per share for the interim period to end-June give it a historic earnings multiple of 3,18 times and an earnings yield of 31,5% on the 88c the share’s trading at. That compares favourably to Comair’s 15,4c HEPS and 12,24 P:E and 8% EY at the 240c/share level.
Of course, Comair has earned the higher valuations through its unrivalled distinction of 65 years’ uninterrupted profitability and paying out nice dividends most of the time. However, 1time seems to have scored an entrepreneurial coup with its acquisition of aircraft maintenance company Safair Technical early this year. The high barriers to entry in the aircraft maintenance industry make for high profit margins and the exposure to foreign currency (maintenance is priced in US dollars) gives added opportunities (as well as currency risk – such as the current strong rand – of course). 1time now operates Africa’s second-largest aircraft maintenance business after SAA Technical and seems to be holding on well to its technical skills.