The summer holiday can come: Wherever you look, incidence rates are falling and more and more countries are opening their borders to tourists. Even if not everyone is immediately ready to travel to foreign countries, the travel industry, which has been hit by the crisis, should gradually be able to breathe again. Data from the Spanish tourist office in Switzerland is encouraging in this respect. According to this, bookings have increased "explosively" since the country was removed from the FOPH list of risk countries.
Such a development is particularly pleasing for the travel group TUI, after all, it had to accept heavy business losses due to corona. In the 2019/20 financial year (30 September), revenue shrank by 55%, while earnings before interest and taxes (Ebit) turned sharply into the red zone: the operating loss totalled EUR 3 bn. In the first half of 2020/21, the pace of decline in terms of revenue accelerated even further. Revenues slumped by almost 90%. On the earnings side, however, there was a slight improvement. On an Ebit basis, the decline amounted to EUR 1.3 bn in the first half of the year. This was mainly due to greater cost discipline, which helped to reduce the average monthly loss from around EUR 250m to EUR 218m.
The biggest declines in revenue at the world's leading tourism group are currently being recorded by the airline TUI fly. However, hotels such as Riu and Robinson as well as the cruise division continue to show a downward trend. On the other hand, the outlook for the upcoming holiday season gives hope. The company counts 2.6 million bookings for the 2021 summer season so far. For the peak season, TUI is planning on 75% of the capacity of summer 2019. Due to good vaccination rates and low infections, the focus is mainly on the regions of Greece, Balearic Islands and Canary Islands. Given the increasing interest, TUI could even imagine extending the summer season into autumn. "We see an enormous pent-up demand for the end of the season, an extension is feasible and this must also be agreed with the destinations," TUI CEO Fritz Joussen recently told journalists. The boss also expects the group to return to profitability in the fourth quarter from July to the end of September.
In order for TUI to remain able to act after the high losses and to satisfy the increasing demand, the capital market was recently tapped. In April, the Group issued a convertible bond worth EUR 400 million, and in May the cruise subsidiary TUI Cruises issued its first bond with a volume of EUR 300 million and an interest rate of 6.5%. According to CFO Sebastian Ebel, cruise bookings for the second half of the year and for 2022 and 2023 are developing well. The gradual pick-up in tourism is also giving a boost to the Corona-ridden TUI share. But even if the price has already risen by half this year alone, the stock is still trading more than a third below its pre-crisis level. The majority of analysts also remain skeptical: Refinitiv's average rating from 10 analyst studies is 4.1, which translates into a sell rating.
Caution is indeed called for with highly volatile stocks such as TUI. However, with structured products, even a consolidation at the share price level can be turned into cash. Two new barrier reverse convertibles make this possible. Both have a comfortable risk buffer of 41%, which means that the TUI share could even suffer a setback without the maximum return being at risk. Speaking of yields, the BRCs come with significantly higher coupons than, for example, the TUI Cruises bond described above. The Swiss franc version offers a high yield of 15.00% p.a., while the identical EUR product even has a coupon of 15.40% p.a.
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