Shock inflation, what is left in the wallet in 2023: TUI, Pathfinder Ventures, Deutsche Bank, Commerzbank

TUI - What will the summer travel season be like in 2023?

TUI, the largest European travel provider, is clearly linked to the disposable income of the population with its business development. For ordinary consumers, high prices for essential goods, as well as electricity and heat, have an extreme impact. According to Statista, the average net income of an unmarried employee in Germany is around EUR 25,500 per year or the equivalent of EUR 2,125 per month. If, because of the sharp increases in rents in recent years, utility costs now also have to be absorbed, at plus 100 to 300%, consumer and travel budgets will likely come under extreme pressure.

After a long-lasting pandemic, strict entry regulations and hygiene controls, travel is now almost as possible as it was in 2019. However, as a large individual travel provider, TUI is dependent on people's purchasing power and willingness to spend. Vacations are only booked when the mood is good, and funds are available. However, if household costs continue rising, many travel plans will likely be abandoned again at short notice. According to current surveys by YouGov, 92% of Germans still want to travel in 2023. Assuming this result as a given, TUI would probably be in for a good travel year.

The TUI share has already gone through a few capital increases, but the price kept falling further south. In the meantime, the value of equity is significantly below the current debt, and TUI is therefore dependent on a positive free cash flow to successively reduce its debt. Currently, the share price of EUR 1.43 is only just above the all-time low of EUR 1.17. Investment bank Berenberg had recently downgraded TUI to "Sell". Whether the "heat escapees" in the coming winter bring the balance sheet up to speed remains highly speculative!

Pathfinder Ventures - Recovery can be this simple

An interesting travel stock is on the price list with Pathfinder Ventures in Canada and Frankfurt. The campsite operator has developed a unique business concept for family-oriented travel in nature. The trend for recreation with additional amenities is currently finding more and more followers. The Company's management is very satisfied with the bookings for the last Thanksgiving weekend. On average, occupancy at all properties has increased to an encouraging 73%, an 18% increase over the previous year. Pathfinder Camp Resorts at Fort Langley and Agassiz-Harrison had occupancy rates as high as 93% and 81%, respectively, from October 7-9. Here, the right concept ensures high occupancy.

"The trend and demand for outdoor recreation is increasing as people seek outdoor activities. As the occupancy numbers show, the RV and camping industry in British Columbia is experiencing strong growth. Customers are coming to camp earlier in the year and staying into the fall months," said CEO and founder Joe Bleackley. In fact, with extension options into the winter, more and more people are moving into their RVs permanently. Pathfinder has developed unique supply concepts for such needs, and demand for this supply is growing rapidly. Therefore, Pathfinder is currently examining specific locations suitable for longer-term RV stays.

Pathfinder is strategically exploring new ways to attract vacation and recreation seekers. Digital booking platforms, modern reservation systems and entertainment offerings for young and old have been installed virtually overnight at historically established sites. The robust demand for decelerated vacation concepts should continue to drive business at Pathfinder in the future, and the expansion opportunities beyond British Columbia are also unique.

Deutsche Bank versus Commerzbank - Loan books likely to come under pressure

It is not only private households suffering from the dramatic cost increases. Over 97% of companies in Germany are classified as SMEs. They employ more than half of all employees in the country and generate around one-third of sales of all companies. But inflation is leaving its mark. A medium-sized company today has to calculate with completely changed input costs, which can only rarely be converted into sales prices. There are countless examples: many an old-established bakery is thinking about closing down because a 70% increase in the price of baked goods can no longer be passed on to customers. How sad!

Worst hit are energy- and electricity-heavy manufacturing operations, which have been suffering for months anyway from strained supply chains and are being pushed into the red by little ability to pass them on on the sales side. The economic crisis now brewing is drawing attention to the balance sheets of Germany's major commercial banks. At Deutsche Bank, 2nd quarter pre-tax profit rose to a 12-year high of EUR 1.5 billion, but loan loss provisions increased only moderately to EUR 233 million from EUR 75 million in the prior-year quarter. At Commerzbank, the operating profit increased from EUR 32 million to EUR 746 million in the second quarter, with the Mittelstand division mBank contributing EUR 103 million. For the third quarter, mBank expects additional charges of EUR 210 to 290 million for "credit holidays" and around EUR 30 million for the replenishment of a fund for borrowers in payment difficulties.

Both banks have maintained their slightly positive outlooks for 2022, subject to a gas emergency in Germany not materializing. Share prices are currently rising against the general sell-off trend and are moving away from the lows in July. Opportunities are currently valued higher than possible risks on the horizon.

With the recent corrections, the stock market offers several entry opportunities. Financial stocks stand or fall with the economy, which so far still appears robust. In the travel industry, the business model remains trump. Pathfinder Ventures presents an interesting concept that is for people and nature.