Tourism Holdings Ltd (ASX: THL) could be one of the biggest bargain ASX shares right now.
That's the view of analysts at Morgans, which have declared that the "sell-off is overdone" following a heavy decline on Tuesday.
In case you're not aware of Tourism Holdings, it is the largest commercial, global recreational vehicle (RV) rental business in the world.
It owns a stable of RV brands across the ANZ, North America, and European markets. These include include Apollo, Britz, Coro, Mighty Campers, and Winnebago.
Investors were hitting the sell button on Tuesday after the company warned that its earnings guidance was at risk from delivery delays.
However, Morgans believes investors were selling unnecessarily and missed some key points. It said:
We think the stock has been oversold over a potential timing issue to FY23 guidance. This isn't a certainty however if it happens, all else being equal, it will boost FY24 by the quantum of the FY23 miss. Importantly, the rental yield outlook is more positive than past guidance, the synergy targets are on track (with upside from the northern hemisphere operations), tourism is expected to fully recover in FY25, a smaller fleet in the future will require less debt funding and management remains extremely disciplined and is focused on delivering improved ROFE.
Why is it a bargain ASX share?
Morgans feels that Tourism Holdings is a bargain ASX share due to its dirt cheap valuation. It highlights that its shares are changing hands for under 9x FY 2025 earnings, which is the year it expects the company to have fully recovered from COVID. Combined with its leadership position globally, it feels this makes it a very attractive option. It adds:
We think the stock has been oversold. THL is now trading on a recovery year (FY25) PE of only 8.7x, which is attractively priced for a global, market leader. Add.
According to the note, Morgans has an add rating and $5.15 price target on its shares. This implies potential upside of 47% over the next 12 months, with a forecast 3.6% dividend yield sweetening the deal even further. No wonder the broker thinks it is a bargain ASX share.
