A Mixed Experience

I started a watch on ASX listed Experience Co (EXP) last year after their acquisition of a string of Cairns based tourism businesses: Raging Thunder, Reef Magic, Big Cat, GBR Helicopters, Tropical Journeys. EXP had previously been Skydive the Beach (SKB) with a business model based on aggregating operations in that sector.

My most recent post followed a profit guidance warning in April after an intense wet season period severely impacted the Cairns business. Experience Co announced FY 2018 results today. This was not well received by investors with EXP down about 5% on robust volume. This appears to be mostly related to performance of Skydive.
Experience 6

Experience actually beat the downgraded April guidance following the wet season. However as we can see here there is a problem in Australian skydiving. Within that it was domestic rather than international visitors. This has been attributed partly to a couple of tandem skydiving fatalities in recent years which includes the Mission Beach fatality last October. A warning on the risks inherent in this kind of business. My guess is also that this would be a business with low repeat customers.

Revenue from other adventure experiences is now close to 50% of the group and this is overwhelmingly the Cairns business. The growth number above is nonsense for comparison as it relates only to the company with acquisitions during the comparison period rather than the underlying business. They do then provide some comparisons for the Cairns business:

Expierience 2Expierience 3Where the businesses were acquired during the course of the financial year the comparison provided is only for the relevant period of EXP control:

Expierience 4Expierience 5

Anyway, investors didn’t like it and are now down more than 50% since the start of the year:

Expierience 1

In initial posts on Experience I did specifically warn that the reason for following and posting on Experience was a relatively transparent insight into this important sector of Cairns tourism and not investment advice. I also specifically warned on understanding dilution in an acquisitive company. While revenue and profit are up for the year, Earnings Per Share (EPS) is down significantly on issued shares and capital to fund acquisitions.

Previous Posts: Experience washed away in wet season; Experience Results 1H2018; An eye on Experience; Experience on Watch

Pokies hold down Reef Casino

Reef Casino released half year results last week. The result was in line with previous guidance at the AGM and while a recovery from last years poor first half was not an outstanding result in historical context: Corporate Coffee Gossip

Detailed breakdown commentary provides a some items of interest:

Casino 1

There is also subsequent commentary in this report that hotel room performance has been boosted by currently reduced inventory (GA Group ex Tradewinds). The weak performance of the EGM (pokie) sector contrasts with positive growth in recent years at hotel and club venues in Cairns. Growth since 2015 which was the previous peak at the casino compared to hotel and club venues in the Cairns Regional Council area and the immediate Cairns City SA2:

                                   Casino          Council LGA       City SA2
June Half 2016         -4.2%                 8.7%                  24.0%
June Half 2017         -6.5%                 1.9%                   -1.0%
June Half 2018         -1.1%                 6.9%                    7.2%

The casino numbers derive from commentary in their reports on (gross) revenue which I’m assuming is comparable to the OLG data for metred win by hotels and clubs. A point to note is that operating EGM numbers in the City SA2 have actually declined over this period but have bumped up again in recent months. There have been more than 100 hotel and club EGM’s added in the CRC area since 2015.

To place that now multi year decline in graphical representation:

Casino 2

Meanwhile down in Canberra our old friends at Aquis have turned in another loss at the only casino in Oz where EGM’s are excluded. Revenue was down 3.6% after now a full half comparable trading post a refurbishment despite impressive tourism numbers for the national capital. Progress on a proposed $350 million casino resort development which would include pokies has stalled in negotiations with the ACT Government. Now who would ever have thought that might happen.

All worth keeping in mind with proposals to include a casino in the planned global tourism hub. Reef Casino have expressed interest in that development and have also in this latest report  indicated that they remain in confidential discussions.

Population and Migration

Migration seems to be a current controversy. Nick Behrens has a recent post questioning the low Queensland share of overseas migration Overseas Migrants to Queensland: Where the bloody hell are you?

The most recent data from ABS: 3218.0 – Regional Population Growth, Australia, 2016-17

This provides ABS estimates of net overseas migration by SA2. I have no idea how good this data is at SA2 level but let’s aggregate it to SA4 for Queensland.

Migration 2

Well it looks like overseas migrants like the Gold Coast with the Surfers Paradise SA2 a standout within that. We should also look at this in terms of population for each area:

Migration 1

There are three themes which appear in these ABS overseas migration numbers: 1) Inner city 2) Education 3) Agricultural labour. The position of Cairns SA4 above its weight straddles these three sectors. These are not all apparent so lets look at SA2 level for Cairns SA4.

Migration 4

Beyond the City the JCU location at Smithfield stands out. This is replicated across Queensland and you can pretty much pick out university location from browsing the data. Possibly some surprises here in agricultural locations such as Mareeba on the scale but this is also replicated in many similar Queensland locations with more intensive agricultural labour requirements.

On a % of SA2 population basis Port Douglas moves higher:

Migration 3

I have recently posted on data around Cairns City SA2: ATO income data and Cairns City

Internal migration numbers for Cairns SA4 in 2016 – 2017 were negative. Net overseas migration is a distinguishing factor which separates Cairns from other regions outside SEQ and kept population growth in Cairns for that year above other regions outside SEQ.

Douglas pokie boom

Monthly Electronic Gaming Machine (EGM) stats for July and while Cairns maintains a comfortable lead in player losses a sustained recovery in Townsville has annual growth neck and neck ay 4.9%.  Ahead of total Queensland growth at 4.1%. This is local council areas ex – casinos:

EGM July2018_1

EGM July2018_2

A curiosity is that growth for Cairns SA4 ex CRC is running ahead of CRC. A quick look through the other local councils reveals Douglas Shire as a standout with in July up 30.1% on the previous year and rolling annual growth now up 17.6%.

EGM July2018_3

EGM July2018_4

The monthly growth numbers are extremely volatile from year to year and Easter again comes into play on that with non-trading Good Friday moving from April last year to March in 2018. However, underlying this is that operational EGM pokie numbers reported in Douglas have increased by 22% since June last year from 145 to 177. Also the inclusion of an additional venue from 7 to 8.

Not sure where this expansion has been with currently listed details of sites and approved EGM’ in Douglas:

Total Approved EGMs: 186

This could make an interesting case study given the region is relatively contained from surrounding competition. A keen punter would have to drive down to Palm Cove Tavern to find the next venue.

The increase in EGM pokie numbers has occurred progressively in a few stages over the past year so there could still be some upside in the 17.6% annual growth as the total increase has still to flow through for a full year.

Palm Cove: unoccupied?

The equivalent Tuesday of this week in August two years ago was the 2016 census. Among questions that linger is whether there were really 30.1% of private dwellings in Palm Cove unoccupied on census night?

Palm Cove

This isn’t too far above locations like the City and Port Douglas at 26.4% and 25%. It is also almost unchanged from 2011 census at 31.0%. Adjacent Clifton Beach is 15.9%. Typically around 10%-11% of private dwellings are unoccupied in Australia on census night.

Private dwellings does not include commercial tourism accommodation where at this time of year occupancy would be expected to be above these numbers anyway. Perhaps a clue is in the data quality statement:

In some cases, it can be difficult to determine whether dwellings are private (PDs) or non-private (NPDs). For example, blocks of self contained apartments or units may provide a mix of short term hotel-style accommodation (i.e. an NPD) or long term apartment (normally PDs) accommodation.

It just seems like a very high number to me particularly for the seasonal high time of year.

Note: these numbers are for smaller state suburb areas.

RTA Data Review

Posting of the Residential Tenancy Authority rental data for Queensland has been delayed for the June quarter. I did send a query and really appreciate the response from RTA who are reviewing the format and have forwarded the North Queensland data in the current excel file format.


RTA June Quarter 2018 2RTA June Quarter 2018 1

Points to note:

No sign of a recovery yet in Townsville.

Mackay continues to recover.

Cairns has been flat as a tack the last year or so.

There is also interesting data in here which I always intend to follow up with deeper analysis but never do. I can’t yet find any positive indication from new bonds lodged in Cairns.