With Australia in summer holidays mode, now may be a good time to give some thought to the holiday parks sector. There has been a roll-up underway in the fragmented industry for a few years now, with two listed stocks among the players buying up family owned holiday parks to create larger businesses with growing market capitalizations.
Ingenia Communities Group is the larger entity with a current market cap of $450 million. But it is diversified with a manufactured home estates business, so holiday park tourism is about a third of its revenue. Aspen Group is smaller at $107 million. It used to be bigger until an unlisted player bought the Aspen Parks Property Fund, but that left it with considerable cash that it has been using to re-build its portfolio.
Chairman, Clive Appleton says Aspen Group’s focus is on building a strong affordable accommodations business and re-establishing scale to its business. In line with this, late last year the company expanded its tourism portfolio with the acquisition of three new holiday parks. These are BIG4 Koala Shores Holiday Park, BIG4 Tween Waters Holiday Park, and Barlings Beach Holiday Park, all in NSW.
Koala Shores is on the foreshore at Lemon Tree Passage near Port Stephens, about 40 kilometres north of Newcastle. The 6.5 hectare tourist park has 142 sites including 34 tourist cabins. The property is a combination of freehold, long leasehold and crown licence. The purchase price is $10.2 million. The initial yield is 9.5 per cent excluding acquisition costs and it is said to have strong and stable cashflow.
Aspen Group’s new chief executive, Joel Cann said Koala Shores extends Aspen’s footprint on the NSW Central Coast as its Tomago Van Village is only 35 kilometres away.
The acquisition will be funded from cash and should settle in early 2017. It is immediately accretive to earnings.
BIG4 Tween Waters Holiday Park is on the southern NSW coast at the Merimbula beach front and a short distance from the town centre. It is a freehold tourist park with 96 sites. Facilities include 31 cabins and a new water park.
The purchase price was $6.8 million and the initial yield is 9.4 per cent excluding acquisition costs. It was funded from existing cash with settlement having occurred in time for this summer’s peak trading season.
Its location means it can form part of a potential ownership cluster on the NSW south coast.
Barlings Beach Holiday Park is also on the south coast, near Bateman’s Bay. The price is $13.3 million for an initial yield of 9.1 per cent before costs. It will be immediately earnings accretive.
Barlings Beach has an absolute beachfront and comprises 8.8 hectares with 259 sites, of which 197 are for annuals and permanent residents.
The acquisition will be funded from existing cash with settlement due in late January.
Mr Cann said the park has potential growth in returns through hands-on asset management, and the returns from Koala Shores and Tween Waters can also be enhanced through Aspen’s marketing and distribution platform.
The new parks bring the value of Aspen’s portfolio to $110 million. Aspen has no debt and cash of $10 million for further acquisitions.
Aspen has also completed an on market share buyback program at an average price of $1.20 per security. The net asset value is $1.26 per security. The recent share price is about $1.05.
Mr Cann expects that subject to completion of the final acquisitions, distributable earnings are expected in the range of 4.8 to 5.3 cents per security. The first half distribution is 2.1 cents per security. (ASX: APZ)