With all the talk about telecoms and the fuss about financials, investors may be inclined to forget another sector of the economy that has experienced rapid growth in recent years.
In a new report, called Transport, Tourism and Accommodation in Ireland, Davy draws attention to the strong performance of the industry over the last five years and profiles the stocks which provide exposure to it.
Between 1993 and 1998, tourism numbers into the Republic increased by 55 per cent, while tourist spending jumped by an even higher 67 per cent. Many people will be astonished to learn that the Dublin/London air route is now the busiest in Europe and the third busiest in the world after Los Angeles/San Francisco and New York/Washington.
"Overall, the potential for continued growth in travel, transportation and accommodation is considerable and the quoted stocks in this sector are likely to continue to outperform," the broker says. These stocks include Ryanair, Irish Continental Group (ICG), Jurys Doyle Group and Ryan Hotels.
Davy describes Ryanair as the leader in low-cost air travel and says that in a European context, the airline's growth potential is almost unlimited.
"The outlook for low-fares, no-frills airlines is very positive. The potential in mainland Europe is particularly significant given relatively short flight times and the low-market share of the low-cost sector," the broker says.
It considers ICG as "a pure play on the Irish economy". The shipping company is currently trading on a 1999 price/earnings ratio of 12.6 and a 2000 p/e of 11.7.
"In view of the consolidation taking place in the industry, the company's attractive infrastructure of routes, services and fixed assets, there is no good reason why the stock should not command a 14 to 15 times p/e rating in the medium term," Davy says.
It also believes that Jurys Doyle Group is significantly undervalued and recommends it, both in an absolute and sectoral context.
Finally, although it believes Ryan Hotels' portfolio needs further rebalancing, it sees little downside from the stock's current levels while the likelihood of a bid is always in the offing.
