BAILLIEU HOLST RESEARCH
09 November 2015
SeaLink Travel Group (SLK)
RECOMMENDATIONS
Rating
BUY ▲
Risk
Medium
Price Target
$4.00
Share Price
$3.39
SNAPSHOT
Monthly Turnover
Market Cap
Shares Issued
52-Week High
52-Week Low
Sector
$15.9mn
$346mn
97.2mn
$3.89
$1.78
Consumer Discretionary
BUSINESS DESCRIPTION
Sealink Travel Group Limited (SLK) is a
diversified tourism and transport company in
Australia. SLK provides services in two
diverse industries being the Transport
Industry, moving regular commuters and
freight between travel destinations, and also
the Tourism Industry, promoting and
packaging holiday destinations, providing
tours and delivering tourists to travel
destinations. SLK operates under the brands
SeaLink and Captain Cook Cruises.
INITIATION OF COVERAGE
Who pays the ferry man?

Initiation of coverage: We initiate coverage of SeaLink Travel Group
(SLK) with a BUY call, DCF valuation of A$3.99 and price target of A$4.00.

History and business: SeaLink Travel Group (SLK) is a diversified
tourism and transport company which moves commuters and freight with
operations in South Australia, NSW, Queensland and the Northern
Territory. The origins of SLK date back to the 1990’s as a ferry operator
between the mainland and Kangaroo Island. Through acquisition and fleet
expansion, SLK has achieved its current diversity through a range of
assets such as Captain Cook Cruises (Sydney Harbour and Murray River)
and Sunferries (Townsville-Magnetic Island).

Acquisition of TSM: In September 2015 SLK announced an agreement to
acquire Transit Systems Marine (TSM) for A$125m. The acquisition was
completed in November 2015. TSM includes a range of businesses
including ferry services for LNG processing projects off the coast of
Gladstone, Queensland, ferry services from the mainland to North
Stradbroke Island and Bay Island group in Queensland, and the Moggill
cable ferry on the Brisbane River. We view the TSM acquisition as
transformational in terms of SLK becoming the largest marine transport/
tourism business in Australia with a sizeable re-weighting of revenue to
Queensland ferry operations which are largely under long-term contracts.

Investment attractions: 1) Long-term nature of existing contracts, many
of which enjoy the benefit of sole operator status; 2) material exposure to
emerging eco-tourism industry through Kangaroo Island and North
Stradbroke Islands; 3) material exposure to domestic tourism industry
through the well-known Captain Cook Cruises brand which should benefit
from a lower A$; 4) modern and well maintained fleet of vessels; and 5)
growth options through further acquisitions, the establishment of new
routes and excess vessel redeployment from the newly acquired
Gladstone contract.

Investment risks: 1) Loss of key contracts although the material contracts
appear to be of a long-term nature; 2) material increase in key expense
line items – staff costs, wharfage charges and diesel fuel; 3) any negative
FX impacts upon the attractiveness of domestic tourism; and 4) sustained
adverse weather conditions in tourism businesses.

Balance sheet: To fund the acquisition of TSM, SLK: 1) undertook an
institutional share placement of A$40m (@A$2.50 p.s.); 2) undertook a
retail SPP which raised A$10.9m (also @ $2.50 p.s.); 3) allocated A$8m in
SLK scrip to the vendors of TSM; and 4) drew debt of A$62m – on a proforma basis SLK estimates its gearing (net debt/equity) on a postacquisition basis at 60% with an underlying pro-forma interest cover
(EBITDA/net interest) of c9 times. SLK has no formal gearing policy. Its
dividend policy is to adopt a payout ratio of 50-70% of NPAT subject to
general business conditions and business plans.
12-MONTH PRICE & VOLUME
RESEARCH ANALYST
Nick Caley
+ 613 9602 9283
ncaley@baillieuholst.com.au
Nicolas Burgess, CFA
+ 613 9602 9379
nburgess@baillieuholst.com.au
Josh Kannourakis
+ 613 9602 9265
jkannourakis@baillieuholst.com.au
Disclosure
The author owns no shares in SLK.
INVESTMENT SUMMARY
Year End: 30 June
Revenue
$mn
EBITDA
$mn
EBIT
$mn
Reported Profit
$mn
Adjusted Profit
$mn
EPS (Reported)
¢
EPS (Adjusted)
¢
EPS Growth
%
PER (Reported)
x
PER (Adjusted)
x
Dividend
¢
Yield
%
Franking
%
2014 (A)
104
15.1
11.5
7.9
7.9
9.9
10.8
-4.1
34.3
31.5
7.4
2.2
100
2015 (A)
112
18.3
14.5
9.6
9.6
12.0
12.3
14.6
28.2
27.5
7.8
2.3
100
Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au Please read the disclaimer at the end of this report.
2016 (E)
166
32.1
26.1
14.8
15.2
16.4
16.8
36.4
20.7
20.2
11.0
3.2
100
2017 (E)
200
42.0
34.6
19.8
19.8
19.4
19.4
15.6
17.4
17.4
13.0
3.8
100
2018 (E)
213
46.2
38.3
22.5
22.5
22.1
22.1
13.4
15.4
15.4
15.0
4.4
100
Page 1
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
Financial summary
SeaLink Travel Group Ltd
Analyst:
Nick Caley
Rating:
BUY
Date:
Price Target:
$4.00
Share Price ($A):
09-November-2015
$3.39
Valuation:
$3.99
Year End:
30 June
Upside/(Downside):
18%
Risk:
Medium
PROFIT & LOSS (A$mn)
FY13A
FY14A
FY15A
FY16E
FY17E
FY18E
92.0
104.4
111.7
165.6
199.7
212.8
Interest Income
0.0
0.1
0.1
0.1
0.2
0.3
Total Revenue
92.0
104.4
111.7
165.7
199.9
Total Cash Operating Expenses
79.7
89.3
93.4
133.5
EBITDA
Operating Revenue
EARNINGS
FY14A
FY15A
FY16E
FY17E
FY18E
EPS - Diluted - Reported
9.9
12.0
16.4
19.4
22.1
213.1
EPS - Diluted - Normalised
10.8
12.3
16.8
19.4
22.1
157.8
166.7
EPS Growth %
-4%
15%
36%
16%
13%
15.0
12.3
15.1
18.3
32.1
42.0
46.2
DPS - Ordinary
7.4
7.8
11.0
13.0
Depreciation & Amortisation
3.1
3.6
3.8
6.0
7.4
7.9
DPS - Special
0.0
0.0
0.0
0.0
0.0
EBIT
9.2
11.5
14.5
26.1
34.6
38.3
DPS - Total
7.4
7.8
11.0
13.0
15.0
Interest Income
0.0
0.1
0.1
0.1
0.2
0.3
Franking %
100.0
100.0
100.0
100.0
100.0
Finance Costs
1.3
1.3
1.2
5.1
6.5
6.5
Net Interest Expense
1.3
1.2
1.1
5.0
6.3
6.2
Payout Ratio % - Ordinary
VALUATION
74%
FY14A
65%
FY15A
67%
FY16E
67%
FY17E
68%
FY18E
Net Profit Before Tax
7.9
10.3
13.4
21.1
28.3
32.1
Income Tax Expense
0.9
3.0
4.0
6.3
8.5
9.6
Net Profit After Tax - Reported
7.0
7.2
9.3
14.8
19.8
22.5
Normalisation Adjustments
0.0
0.6
0.2
0.4
0.0
0.0
Net Profit After Tax - Normalised
7.0
7.9
9.6
15.2
19.8
22.5
BALANCE SHEET (A$mn)
FY13A
FY14A
FY15A
FY16E
FY17E
FY18E
Cash
1.0
4.4
2.3
7.4
15.1
23.4
Receivables
2.2
3.0
3.2
5.6
6.0
Other Financial Assets
0.0
0.1
0.0
0.0
0.0
Inventories
1.0
1.4
1.3
1.3
1.3
Other
1.3
1.4
1.2
1.2
1.2
Total Current Assets
5.5
10.3
8.0
15.6
23.6
32.3
27.5
20.2
17.4
15.4
12.9
10.6
15.5
11.5
10.2
EV/EBITDA (x)
9.8
8.4
12.6
9.5
8.4
2.2%
2.3%
3.2%
3.8%
4.4%
Price/Book (x)
4.6
4.2
2.9
2.7
2.5
Price/NTA (x)
5.3
4.8
3.7
3.4
3.1
FY14A
FY15A
FY16E
FY17E
FY18E
Dividend Yield (%) - Ordinary
GROWTH
Total Rev. Growth (% pcp)
13%
7%
48%
21%
7%
12%
5%
43%
18%
6%
6.4
EBITDA Growth (% pcp)
23%
21%
76%
31%
10%
0.0
EBIT Growth (% pcp)
25%
26%
80%
33%
11%
1.3
NPBT Growth (% pcp)
30%
30%
57%
34%
13%
1.2
NPAT Growth (% pcp)
3%
29%
58%
34%
13%
Non Current Assets
Intangibles
31.5
EV/EBIT (x)
Cash Op. Exp. Growth (% pcp)
Current Assets
Property, Plant & Equipment
P/E (x)
FY14A
FY15A
FY16E
FY17E
FY18E
EBITDA Margin (%)
MARGINS & RETURNS
14%
16%
19%
21%
22%
50.5
67.2
72.6
170.2
170.8
171.5
EBIT Margin (%)
11%
13%
16%
17%
18%
6.7
6.6
6.6
26.6
26.6
26.6
NPBT Margin (%)
10%
12%
13%
14%
15%
1.8
2.7
2.7
2.7
2.7
2.7
ROIC (%)
19%
18%
18%
21%
22%
Total Non Current Assets
59.1
76.5
82.0
199.6
200.2
200.9
ROE (%)
16%
16%
14%
16%
17%
Total Assets
64.5
86.7
90.0
215.1
223.8
233.2
ROA (%)
9%
10%
8%
9%
10%
30%
30%
30%
30%
30%
FY14A
FY15A
FY16E
FY17E
FY18E
Other
Effective Tax Rate (%)
Current Liabilities
Payables
8.3
Unearned Revenue
0.0
3.7
3.8
5.6
6.0
6.4
Net Debt (A$mn)
Loans & Borrowings
2.2
1.5
3.3
3.3
3.3
3.3
Net Debt/Equity (%)
Other
Total Current Liabilities
6.3
5.2
8.9
9.5
10.0
9
8
65
57
49
17%
13%
55%
45%
36%
4.0
5.6
6.0
6.0
6.0
6.0
Int. Cover (x) - EBITDA/Net Int.
12.6
17.0
6.4
6.7
7.4
14.6
17.1
18.4
23.9
24.8
25.8
Cash Conversion %
SEGMENTAL
81%
67%
74%
66%
67%
FY14A
FY15A
FY16E
FY17E
FY18E
17.2
12.0
7.0
69.0
69.0
69.0
Operating Revenue
Non Current Liabilities
Loans & Borrowings
GEARING
Unearned Revenue
0.0
1.5
1.3
1.3
1.3
1.3
SeaLink South Australia
50.6
54.0
57.8
61.8
66.1
Other
2.0
2.2
2.0
2.0
2.0
2.0
Captain Cook Cruises
39.5
42.5
45.5
48.7
52.1
Total Current Liabilities
19.2
15.7
10.3
72.3
72.3
72.3
SeaLink QLD/NT
14.0
15.3
62.3
89.2
94.6
Total Liabilities
33.7
32.8
28.7
96.3
97.2
98.1
Corporate
0.3
-0.1
0.0
0.0
0.0
8.8
30.2
33.9
84.8
84.8
84.8
Total Operating Revenue
104.4
111.7
165.6
199.7
212.8
SeaLink South Australia
8.2
10.5
11.8
12.7
13.6
Captain Cook Cruises
4.3
5.3
5.3
6.1
7.1
SeaLink QLD/NT
2.5
2.5
15.0
23.2
25.5
15.1
18.3
32.1
42.0
46.2
Contributed Capital
0.5
0.5
0.5
0.5
0.5
0.5
Retained Earnings
21.6
23.3
26.9
33.6
41.3
49.8
Total Equity
CASH FLOW (A$mn)
30.8
53.9
61.3
118.9
126.6
135.1
FY13A
FY14A
FY15A
FY16E
FY17E
FY18E
Reserves
Cash at Start
EBITDA
1.6
-0.3
4.4
2.3
7.4
15.1
EBITDA
11.6
12.3
12.2
23.9
27.8
30.9
EBITDA Margins
Cash Flow From Investing
-3.0
-17.9
-9.1
-123.6
-8.0
-8.5
SeaLink South Australia
16%
19%
21%
21%
21%
Cash Flow From Financing
-10.5
10.3
-5.3
104.8
-12.0
-14.1
Captain Cook Cruises
11%
12%
12%
13%
14%
-1.9
4.7
-2.2
5.1
7.7
8.3
SeaLink QLD/NT
18%
16%
24%
26%
27%
-0.3
4.4
2.3
7.4
15.1
23.4
Group
14%
16%
19%
21%
22%
Cash Flow from Ops
Net Cash Flow
Cash At End
Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au Please read the disclaimer at the end of this report.
Page 2
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
Investment view

Initiation of coverage: Initiation of SeaLink Travel Group (SLK) with a BUY call, DCF

Valuation: Our DCF valuation includes the following assumptions: 1) risk discount rate of
10%; 2) terminal growth rate of 3%; 3) long-term revenue growth rate of 8% per annum;
and 4) long-term EBITDA margin of 23%.

Valuation upside: As part of the recently announced acquisition of Transit Systems
Marine (TSM), SLK will acquire five Capricorn class vessels (400 passengers) of which it
expects four will be surplus to requirements in terms of TSM’s current and future contracts.
SLK has identified a number of potential routes for these vessels such as Port Phillip Bay in
Melbourne and Auckland Harbour in New Zealand. SLK recently confirmed that it had taken
over discussions (that TSM had in progress pre-acquisition) with the Little Group for the
operation of a high speed ferry service on Port Phillip Bay. Our back of the envelope
calculation is that if SLK could secure one additional route which is say the same size as its
Magnetic Island contract (using two vessels) our FY16 EBITDA would lift by around 4%.

Investment attractions: 1) Long-term nature of existing contracts, many of which enjoy

Investment risks: 1) Loss of key contracts although the material contracts appear to be

Gearing policy: To fund the acquisition of TSM, SLK undertook: 1) an institutional share
placement of A$40m (@A$2.50 p.s.); 2) a retail SPP to raise A$10.9m (also @ $2.50 p.s.);
3) allocated A$8m in SLK scrip to the vendors of TSM; and 4) drew debt of A$62m – on a
pro-forma basis SLK estimates its gearing (net debt/equity) on a post-acquisition basis at
60% with an underlying pro-forma interest cover (EBITDA/net interest) of c9 times. SLK
has no formal gearing policy.

Dividend policy: SLK’s dividend policy is to adopt a payout ratio of 50-70% of NPAT
subject to general business conditions and business plans.
valuation of A$3.99 and price target of A$4.00.
the benefit of sole or protected operator status; 2) material exposure to emerging ecotourism industry through Kangaroo and North Stradbroke Islands; 3) material exposure to
domestic tourism industry through the well-known Captain Cook Cruises brand which
should benefit from a lower A$; 4) modern and well maintained fleet of vessels with the fleet
expanding from 27 to 60 vessels post the acquisition of TSM; and 5) growth options
through further acquisitions, the establishment of new routes and excess vessel
redeployment from the newly acquired Gladstone contract.
of a long-term nature; 2) material increase in key expense line items – staff costs, wharfage
charges and diesel fuel; 3) any negative FX impacts upon the attractiveness of domestic
tourism; 4) sustained adverse weather conditions in tourism businesses; and 5) SLK does
not disclose passenger numbers or route by route revenue break-ups which serves to
increase forecasting risk.
History

History: SeaLink Travel Group (SLK) is a diversified tourism and transport company that
moves commuters and freight with operations in South Australia, NSW, Queensland and
the Northern Territory. The origins of SLK date back to the 1970’s when Philanderer Ferries
was formed to operate between the mainland and Kangaroo Island. The business was
acquired by Malaysian based MBF in 1989 and renamed Kangaroo Island SeaLink. In 1996
the business was acquired by Australian investors and staff. The group has since grown
through a range of fleet and infrastructure expansion and acquisition in the transport and
adjacent travel services industries such as:
-
1999: Acquired Adelaide Sightseeing Day Tours and City Travel Centre;
-
2003: Acquired Australian Holiday Centres in Adelaide, Melbourne and Sydney;
-
2004: Acquired New Zealand
-
2005: Acquired Kangaroo Island Adventure Tours;
-
2010: Acquired Kangaroo Island 4WD Luxury Touring;
-
2011: Acquired Sunferries Townsville;
-
2011: Sold SeaLink New Zealand
Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au Please read the disclaimer at the end of this report.
Page 3
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)

-
2011: Acquired Captain Cook Cruises and Matilda Cruises, Sydney Harbour and
Murray River Cruises;
-
2013: Established SeaLink Northern Territory; and
-
2015: Acquired Transit Systems Marine Business in Queensland.
ASX listing: SLK listed on the ASX in 2013 via the issuance of 15m shares at A$1.10 per
share to raise A$16.5m. Post the IPO, SLK had 70m shares on issue with existing
shareholders retaining 78.5% of the company. The Board and CEO currently own c18% of
SLK’s shares on issue.
The Divisions

SLK reports its results (pre the acquisition of TSM) based on three operating divisions as
follows:
-
Kangaroos Island SeaLink (48% of FY15 revenue): Operates ferry services between
the Australian mainland and Kangaroo Island, tours in South Australia, retail travel
services and accommodation facilities.
-
Captain Cook Cruises (38% of FY15 revenue): Operates tourist cruises, charter
cruises and ferry passenger services on Sydney Harbour and on the Murray River.
-
SeaLink Queensland (14% of FY15 revenue): Operates ferry passenger services in
Townsville and Darwin and also offers packaged holidays. The operations of TSM will
be reported as a separate division post acquisition.
The businesses in detail
Kangaroo Island SeaLink (KIS)

The service: KIS operates two ferries which typically operate a minimum of four daily
services from Cape Jervis in South Australia to Penneshaw on Kangaroo Island. Services
can increase up to 12 each way trips per day during peak periods (generally Christmas and
Easter). Cape Jervis is 107kms from Adelaide (see map below). The ferry trip from the
mainland to Cape Jervis takes approximately 45 minutes. KIS restricts passenger capacity
on a select number of trips per week due to operating as a fuel service for Kangaroo Island
(generally only 2 runs a week).
FIG.1: KANGAROO ISLAND ROUTE MAP
Source: SeaLink

Pricing: Current pricing is A$98 for a return trip, although the fare increases to A$188 for a
return trip with a car. All bookings must be made in advance of the trip with no payment
facility available at the port. SLK carries the fare box risk for the Kangaroo Island ferry
service. Fare increases for both passengers and freight are generally limited to CPI
increases.
Baillieu Holst Ltd ABN 74 006 519 393 www.baillieuholst.com.au Please read the disclaimer at the end of this report.
Page 4
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)

Kangaroo Island visitation: SLK does not provide exact passenger statistics for its
Kangaroo Island service. However, given the limited number of means by which to access
the island, we view visitation statistics as a good proxy. As per FIG.2 below, the island had
120k overnight visits in 2014/15 of which the mix was roughly 70/30 between
domestic/international visitors. These statistics are likely to understate total visitations due
to day trips.
FIG.2: KANGAROO ISLAND MIX OF VISITORS – 2014/2015
Overnight Visits ('000's)
Nights ('000's)
36
84
61
23
120
125
365
242
123
490
International
Total Domestic
Intrastate
Interstate
Total Visits
Source: South Australian Tourism Commission

The fleet: KIS operates two ocean-going catamarans on the Kangaroo Island run: 1)
SeaLion 2000 with capacity for 378 passengers and 55 cars; and 2) Spirit of Kangaroo
Island with capacity of 243 passengers and 53 cars. SeaLion 2000 was commissioned in
1998 and has recently undergone a major refurbishment – it is estimated to be mid-way
through its estimated life. Spirit of Kangaroo Island was commissioned in 2003 and has
undergone regular refurbishments.
FIG 3: KANGAROO ISLAND’S SEALION 2000
FIG 4: KANGAROO ISLAND’S SPIRIT OF KANGAROO ISLAND
Source: SeaLink
Source: SeaLink

Competition: Competition is currently limited in nature. KIS holds a major competitive
advantage in that the South Australian Government has granted it exclusivity of using the
Cape Jervis port facility for one hour before and after any scheduled KIS service until 2024.

Revenue mix and growth: Although not disclosed, we estimate that around 80% of
revenues derived from Kangaroo Island ferry services relate to passenger services with the
balance being freight. SLK estimates the organic growth rate for revenue in the 2-5% range
as exhibited modest growth in recent years with only 2% CAGR revenue growth since
FY11. However, the division achieved revenue growth of 6.8% pcp in FY15 – the strongest
outcome in many years. We expect that Kangaroo Island’s dependence upon tourism will
result in an uplift in demand from FY16 from the lower A$. For FY16, SLK is looking to
stimulate growth by holding fare rates at present.
Ancillary businesses

Adelaide Sightseeing: A long standing South Australian based tour operator for group and
charter tours covering Adelaide, Barossa Valley, Hahndorf, Kangaroo Island, McLaren Vale
and the Murray River. There are a range of regular tours that last from one hour to up to
seven days. The business employs a fleet of around 30 vehicles comprising buses (11-53
seats) of various sizes and 4WDs. Vehicles are retained by SLK for about seven years.
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Page 5
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)

Odysseys: Guided tours of Kangaroo Island using 4WDs for groups up to 12. Specialist
languages are accommodated.

Vivonne Bay Lodge: Backpacker style accommodation located on the south coast of
Kangaroo Island. The lodge has capacity for 34 beds across a mix of room configurations.
Travel packages can be organised which bundles accommodation, ferry transfers and/or
car hire.

Kangaroo Island Adventure Tours: A two day guided tour of Kangaroo Island which
departs from Adelaide and includes accommodation at the Vivonne Bay Lodge.

Australian Holiday Centre: Travel agency business which focuses on the Australian
tourist market.
Captain Cook Cruises (CCC)

Sydney: Covers a range of services and cruise offerings on Sydney Harbour which we
categorise as: 1) Dining cruises covering breakfast, lunch and dinner; 2) sightseeing
cruises covering a range of scheduled tours such as whale watching and the story of
Sydney Harbour; 3) 24 hour passes which provide a “hop on-hop off” service to a range of
attractions in Sydney; 4) regular ferry services; and 5) private charters. We understand that
around 80% of CCC’s divisional revenue is derived from operations on Sydney Harbour
versus Murray River operations.
FIG.5: SYDNEY HARBOUR CRUISES
Source: SeaLink
-
Pricing: As detailed in FIG.6, CCC employs a host of pricing packages for its various
products. Dining cruises range from A$77 to A$200. Adult passes for the hop-on-hop
off service vary from A$40 to A$149 depending upon the number of attractions visited.
Pricing is regulated for ferry services conducted by CCC on behalf of NSW Transport.
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Page 6
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
FIG.6: SYDNEY HARBOUR CRUISES FARE SCHEDULE
Brand
Route
Captain Cook Cruises
Sydney Harbour
Taronga Zoo Express
Fort Denison Ferry
Circular Quay ‐ Darling Harbour Ferry
Manly Sightseeing Ferry
Lane Cove Ferry
Watsons Bay Ferry
Manly ‐ Watsons Bay Sightseeing Ferry
Luna Park Ferry
Shark Island Ferry
Sea Life Sydney Aquarium Ferry
Manly Sea Life Ferry
Wild Life Sydney Zoo Ferry
Madame Tussauds Sydney Ferry
Sydney Tower Ferry
Gold Dinner Cruise
Captains Dinner Cruise
Starlight Dinner Cruise
Sunset Steak & Lobster Dinner Cruise
Sunset Dinner Cruise
Whale Watching
Taronga Zoo and Whale Watching
Harbour Story
Harbour Story Premium
Cocktail Cruise
Harbour Highlights
Hop On Hop Off ‐ 24 hour pass
Hop On Hop Off ‐ 24 hour pass + 3 attractions
Hop On Hop Off ‐ 24 hour pass + 5 attractions
Adult $ 53.00
$ 20.00
$ 14.00
$ 18.00
$ 14.00
$ 14.00
$ 15.00
$ 14.00
$ 20.00
$ 54.00
$ 43.00
$ 54.00
$ 54.00
$ 40.00
$ 199.00
$ 139.00
$ 112.00
$ 99.00
$ 77.00
$ 65.00
$ 99.00
$ 39.00
$ 49.00
$ 42.00
$ 30.00
$ 40.00
$ 99.00
$ 149.00
Return
Child
$ 29.00
$ 17.00
$ 7.00
$ 12.00
$ 7.00
$ 7.00
$ 7.00
$ 7.00
$ 17.00
$ 35.00
$ 21.00
$ 35.00
$ 35.00
$ 22.00
$ 199.00
$ 89.00
$ 52.00
$ 99.00
$ 46.00
$ 50.00
$ 55.00
$ 22.00
$ 32.00
$ 22.00
$ 16.00
$ 24.00
$ 59.00
$ 89.00
Concession
$ 29.00
$ 17.00
$ 7.00
$ 12.00
$ 7.00
$ 7.00
$ 7.00
$ 7.00
$ 17.00
$ 35.00
$ 21.00
$ 35.00
$ 35.00
$ 22.00
$ 199.00
$ 89.00
$ 52.00
$ 99.00
$ 46.00
$ 50.00
$ 55.00
$ 22.00
$ 32.00
$ 22.00
$ 16.00
$ 24.00
$ 59.00
$ 89.00
Source: SeaLink
-
The fleet: As per FIG.7, SLK currently operates 14 vessels on Sydney Harbour.
Around half the fleet are large vessels that can be used for cruises and functions with
passenger capacity in the 300 to 700 range. The balance of the fleet is working
passenger ferries that can also be booked for functions with smaller passenger
capacity of up to 200.
FIG.7: CAPTAIN COOK CRUISES – SYDNEY HARBOUR FLEET
Route
Sydney Harbour
Pasenger Ferry /Freight/Cruise/Functions
Cruise/Functions
Cruise/Functions
Cruise/Functions
Cruise/Functions
Cruise/Functions
Cruise/Functions
Cruise/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Passenger Ferry/Functions
Vessel
Sydney 2000
Captain Cook 3
John Cadman 3
John Cadman 2
Sydney Crystal
Matilda 3
Maggie Cat
Elizabeth Cook
Mary Reibey
Annabelle Rankin
Violet McKenzie
Alice
Megan
Jillian
Length (m)
63
37
35
39
20
25
32
24
24
24
24
24
24
24
Capacity (no)
600-700
190-400
230-300
280-400
45-80
110-300
300
128-198
128-198
128-198
128-198
118-148
118-149
118-150
Source: SeaLink website
FIG 8: SYDNEY 2000
FIG 9: ROCKET CLASS FERRY
Source: SeaLink
Source: SeaLink
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Page 7
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)

-
Competition: There are a range of competitors on Sydney Harbour which offer cruise
services such as Vagabond Cruises, Sydney Harbour Escapes, Majestic Prestige
Harbour Cruises together with other specialist dinner cruise operators. Our observation
would be that whilst these players have a large number of vessels (Sydney Harbour
Escapes has over 50) most vessels cater for the smaller end of the market with
passenger capacity generally in the 50 to 100 range.
-
Growth: In FY15 (first full year of trading as part of SLK) revenue grew by 7.6% with
the majority of the growth driven by contract ferry services on Sydney Harbour and an
increase in passenger numbers on the Murray Princess. The outlook for growth looks
to be strong due to: 1) lower $A should stimulate both increased levels of domestic and
international travel; 2) FY16 will include a full period contribution from three new
vessels acquired during FY15; and 3) a full period inclusion of the addition of Manly to
the Hop-On-Hop-Off service.
Murray River: Offers a range of three, four and seven day tours on the Murray River which
can also be combined with other packaged offerings in the SLK groups such as Kangaroo
Island. The business employs the PS Murray Princess which is a paddlewheeler with a
capacity for 120 people. The vessel is modern having its paddlewheel replaced in 2014.
Since acquiring CCC, SeaLink has refurbished 60% of the rooms and refurbishment in
ongoing. In terms of competitors on the Murray River, there are a number of commercial
paddlewheelers and paddlesteamers – however, the majority are smaller vessels and
operate for shorter duration tours lasting less than one day.
FIG.10: SEALINK 4 & 7 NIGHT MURRAY RIVER CRUISES
Source: SeaLink
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Page 8
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
FIG.11 MURRAY PRINCESS
Source: SeaLink
FIG.12: MURRAY RIVER CRUISES PRICING SCHEDULE
Brand
Route
Adult Captain Cook Cruises Murray River
Murray River
3 Night Cruise
4 Night Outback Heritage Cruise
7 Night Murraylands & Wildlife Cruise
Adelaide, Murray River and Kangaroo Island Package
$ 926.00
$ 1,266.00
$ 1,888.00
$ 1,849.00
Return
Child
$ 926.00
$ 1,266.00
$ 1,888.00
$ 1,849.00
Concession
$ 926.00
$ 1,266.00
$ 1,888.00
$ 1,849.00
Source: SeaLink
SeaLink Queensland

Townsville: Operator of daily services (currently 18) between Townsville and Magnetic
Island (50 minute trip), and weekly (five times a week) between Townsville and Palm Island
(1.5 hour trip) largely for the indigenous community.
FIG.13: NORTH QLD ROUTE MAP
Source: SeaLink

The fleet: The business operates four passenger only vessels with capacities varying from
220 to 320 passengers.
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Page 9
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
FIG 14: SEALINK’S MAGNETIC ISLAND FERRY
Source: SeaLink

Pricing: Current pricing for an adult return trip between Townsville and Magnetic Island is
A$32.00. SLK also charges A$7.50 for all day car parking in Townsville. Current adult
return fares between Townsville and Palm Island are A$66.50. Whilst SLK takes the fare
box risk in relation to Magnetic Island, it operates the Palm Island route as a contractor with
the Queensland Government taking fare box risk. Any changes to timetables (for both
destinations) and/or fares (for Magnetic Island) must be approved by the Queensland
Department of Transport.

Competition: SLK has one major competitor for the Magnetic Island route in Fantasea
Cruising which operates eight daily services compared to SLK’s 18. Fantasea currently
charges $25.00 for an adult return fare to Magnetic Island (barge only) compared to SLK at
A$32.00. Fantasea’s service also incorporates the ability to transport vehicles. SLK is the
exclusive operator of the Palm Island route. In March 2014, SLK had its agreement to
operate both services extended for a further five years by the Queensland Department of
Transport.

Travel agencies: Operates two retail travel agencies located at the Breakwater Terminal,
Townsville and the Nelly Bay Terminal, Magnetic Island. The business focuses on selling
tours, accommodation and transport product from the North Queensland region. It also
develops a range of existing travel packages and has established a wholesale program
designed to increase the distribution of North Queensland product to domestic and
international tourism distribution channels.
Darwin SeaLink Northern Territory

Operates ferry services from Darwin to Mandorah (currently 13 services per week) and
more recently between Darwin and the Tiwi Island (three times per week). The Tiwi Island
service can also provide charter tours of the islands. The business operates two high-speed
vessels; one with capacity of up to 250 people, the other carries 110.20
FIG.15: DARWIN TO MANDORAH ROUTE MAP
Source: SeaLink
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Page 10
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
FIG.16: DARWIN FERRY
FIG.17: DARWIN FERRY
Source: SeaLink
Source: SeaLink
Transit Systems Marine

In September 2015, SLK announced its intention to acquire 100% of Transit Systems
Marine (TSM) for A$125m. The acquisition was completed in November 2015. TSM was
founded in 1997 and operates 33 vessels in the Gladstone and South East Queensland
region which we detail below. SLK intends to rebrand TSM as SeaLink upon change of
ownership and will report the business as part of its divisional reporting for SeaLink
Queensland.
-
Gladstone: TSM’s operations relate to the construction and subsequent operation of
LNG processing plants on Curtis Island off the coast of Gladstone in Queensland. The
construction phase is scheduled to be completed in June 2017 with TSM providing
barging and ferry services under contracts with two of the three construction projects.
After completion, TSM has won two contracts which cover the three plants. The
business currently operates 14 vessels of which the future operational phase contract
already won will require nine vessels required for the post-construction phase. The
current fleet consists of five Capricorn class vessels (400 passengers) which SLK has
a range of re-deployment options for. No revenue break-up for TSM has been provided
by SLK although we understand that the Gladstone contract is the largest revenue
contributor in the business acquired.
FIG 18: GLADSTONE ROUTE MAP
Source: SeaLink
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Page 11
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
-
North Stradbroke Island: TSM currently operates three vessels servicing the
Queensland mainland to Dunwich on North Stradbroke Island (13 km trip) for both
vehicular and passenger services – TSM is currently the only operator of vehicular
barges. TSM carries all fare box risk and has long-term wharfage arrangements at
Cleveland (mainland) and Dunwich – TSM’s lease at Cleveland ferry terminal expire in
February 2023.
-
Bay Island Transit Service (BITS): Operates five passenger ferries to provide
services from Redland Bay (Queensland mainland) to four islands (Karragarra,
Macleay, Lamb and Russell). TSM is the operator of the service under a contract with
the Queensland Government until end 2018 – the Queensland Government carries the
fare box risk with TSM being remunerated in a cost plus contract with incentives for
passenger growth.
FIG.19: BAY ISLAND TRANSIT SERVICE GEOGRAPHIC
REGION
FIG.20: BAY ISLAND TRANSIT SERVICE VESSELS
Source: SeaLink
-
Bay Island Barging Service: Operates three vessels for the same group of islands as
BITS from Redland Bay. The service provides the only transport of vehicles, goods and
services to the Southern Moreton Bay Islands with the majority of customers being
local residents. The service has a lease for marine facilities which is due for renewal in
2019.
FIG.21: BAY ISLAND BARGING SERVICE REGION
FIG.22: BAY ISLAND BARGING SERVICE VESSELS
Source: SeaLink
Source: SeaLink
-
Moggill Ferry: Operator a new cable ferry (capacity of 22 cars and 65 passengers) to
undertake the crossing of the Brisbane River in the western suburbs of Brisbane. The
service connects South/West Brisbane and Ipswich with North/West Brisbane and is
viewed as an alternative route in peak hour. TSM is remunerated on a set fee contract
under a contract with the Queensland Government which expires in December 2015.
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Page 12
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)
FIG.23: MOGGILL FERRY GEOGRAPHIC REGION
Source: SeaLink
-
Mineral Sands Barging: Undertakes around 150 barge trips per year transporting
mineral sands on behalf of Sibelco under a contract that lasts until June 2016. TSM
had previously out-sourced the contract to a third party operator.
Financial Overview

Revenue: In FY15, SLK delivered operating revenue of A$111.3m (+7.2% pcp) with a
relatively even spread of growth between the three main operating divisions. In FY15
around 48% of group revenues were derived in South Australia with a further 38% derived
in NSW. Following the acquisition of TSM, it is estimated that around 50% of group
revenues will be derived in Queensland.
FIG 24: SEALINK REVENUE MIX
250.0
Acquisition of TSM
200.0
Acquisition of Captain Cook Revenue AUD $m)
150.0
100.0
50.0
0.0
FY11
FY12
FY13
FY14
FY15
FY16F
FY17F
FY18F
‐50.0
SeaLink South Australia
Captain Cook Cruises
SeaLink QLD/NT
Corporate
Source: SLK, Baillieu Holst forecasts

Expenses: In FY15 the three largest line items in SLK’s operating expense base (exadministration expenses) were: 1) Direct wages (23% of operating revenue); 2) meals,
beverages and accommodation (10% of operating revenue); and 3) tour costs (10% of
operating revenue). Interestingly fuel, repairs and maintenance costs accounted for only 8%
of operating revenue in FY15.
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Page 13
BAILLIEU HOLST RESEARCH
SeaLink Travel Group Limited (SLK)

Margins: SLK’s margins have traditionally been in the mid-teens. With the ability to
leverage SLK’s corporate office we expect SLK’s margins to reach 20% after the acquisition
of TSM.
FIG 25: SEALINK EBITDA MIX
50.0
45.0
40.0
EBITDA ($m)
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
FY13
FY14
FY15
SeaLink South Australia
FY16F
Captain Cook Cruises
FY17F
FY18F
SeaLink QLD/NT
Source: SLK, Baillieu Holst forecasts

Balance sheet: To fund the acquisition of TSM, SLK: 1) undertook an institutional share
placement of A$40m; 2) undertook a retail SPP to raise A$10.9m; 3) allocated A$8m in
SLK scrip to the vendors of TSM; and 4) drew debt of A$62m – on a pro-forma basis SLK
estimates its gearing (net debt/equity) on a post-acquisition basis at 60% with an underlying
pro-forma interest cover (EBITDA/net interest) of c9 times.

Cash flow: As per FIG.26 below net cash flow from operations enjoys a strong relationship
with EBITDA.
FIG 26: SEALINK CASH CONVERSION (NET OPERATING CASH
FLOW TO EBITDA)
115%
110%
105%
100%
95%
90%
85%
FY13
FY14
FY15
FY16F
FY17F
FY18F
Source: SLK, Baillieu Holst forecasts
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Page 14
BAILLIEU HOLST RESEARCH
This document has been prepared and issued by:
Baillieu Holst Ltd
ABN 74 006 519 393
Baillieu Holst Ltd
Australian Financial Service Licence No. 245421
Participant of ASX Group
Participant of NSX Ltd
ABN 74 006 519 393
Australian Financial Service Licence No. 245421
Participant of ASX Group
Participant of NSX Ltd
www.baillieuholst.com.au
Analysts’ stock ratings are defined as follows:
Buy: The stock’s total return is expected to increase by at least 10-15 percent from the current share
price over the next 12 months.
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share price over the next 12 months.
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price over the next 12 months.
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Melbourne (Head Office)
Address Level 26, 360 Collins Street
Melbourne, VIC 3000 Australia
Postal PO Box 48, Collins Street West
Melbourne, VIC 8007 Australia
Phone +61 3 9602 9222
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Bendigo, VIC 3550 Australia
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contained in this advice, such advice being based solely on public information which has not been verified by
Baillieu Holst Ltd.
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-
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Page 15