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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| Dalata Hotel Group Plc | DAL | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
|
|
|---|---|---|---|---|
| -32.00 | -8.60% | 340.00 | 16:35:10 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 354.00 | 354.00 | 354.00 | 340.00 | 372.00 |
| Industry Sector |
|---|
| TRAVEL & LEISURE |
| Top Posts |
|---|
Posted at 20/6/2014 16:27 by wexboy Company: Dalata Hotel GroupPrior Post(s): None New IPO (Mar-2014) Ticker: DHG:ID Price: EUR 2.85 Dalata's really just another cash blind pool this time one focused on Irish hotel acquisition bolted on to an existing & much smaller hotel management business. [Run by Pat McCann (a former CEO of Jurys Doyle Hotel Group), and currently operating 40 hotels (with over 6,100 rooms) - over a quarter are located in Dublin, and a third have been re-branded with Dalata's own Maldron Hotels brand]. This is a somewhat perplexing reversal of the normal trend towards separating out hotel ownership (into REIT structures) from asset-light hotel management. You have to wonder if a REIT was originally considered (implying the hotel management entity would have remained private) perhaps the prospect of long-term related-party deals for the management of acquired hotels was a bit much for investors to swallow? Obviously, an eventual spin-out of the management business could be attractive... Unfortunately, much of Dalata's current management business comes from banks & receivers. If we assume a continuing revival in the Irish economy & tourism, as Dalata predicts, these contracts may end as ownership migrates back into private hands. On the other hand, new (passive) hotel investors may actually be keen to outsource management. Dalata now intends to buy 16-25 hotels we can assume the majority of these already have & will maintain contracts with its management business. [Dalata also plans to develop new hotels for the under-supplied Dublin market]. Bearing in mind these risks, plus the lack of a premium valuation as long as the management business remains buried inside what's essentially a hotel ownership structure, I'd haircut my valuation accordingly. The business reported 2013 revenue of EUR 60.6 million & an operating profit margin of 8.1%. I'd normally assign a 0.75 P/S multiple, but we'll apply a 50% haircut in this instance. We also have EUR 255 M raised from the IPO (net of expenses, at EUR 2.50 per share), plus EUR 4.1 M of net debt: (EUR 60.6 M Revenue * 0.75 P/S * 50% Haircut + 255 M IPO Cash 4.1 M Net Debt) / 122 M Shares = EUR 2.24 Like the new Irish REITs, Dalata's quite over-valued at this point in fact, only Green REIT (GRN:ID) is more expensive. While I'd clearly be sensitive to price, DHG has an enormous advantage it's a twofer, maybe even a threefer, i.e. it's a property play, but it's also an Irish tourism/domestic spending play. The domestic angle's debatable, as many Irish consumers have opted for bargain staycations in recent years, so we may see them heading abroad again for holidays in increasing numbers as the economy revives. Which might suggest Aer Lingus (see above) is the superior tourism/domestic spending play...but throw property into the mix & Dalata bears watching. Price Target: EUR 2.24 Upside/(Downside): (21)% |
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