Elegant Hotels Share Discussion Threads

[salchow] 14/10/2016 10:44

LBO re 182 - we look at it differently. The dividend announced is out of profits for the past year where profits were sufficient. As a shareholder for the past year I would like my share of those profits rather than leave it in the company. If dividends can't be paid for next year (I think they will be) then that is a matter for the future.

Funnily enough I made another rare posting on Inland this morning, a share where I had made tens of thousands but came out because the dividend was negligible and I made the point that in that case more profits should be distributed even if it gave rise to higher borrowings. Not everybody's view but more often than not the first thing that attracts me to a company is the dividend. I appreciate that a 10% dividend often implies risk in at least the short term but not always so.

[davebowler] 14/10/2016 10:39

Zeus;
Elegant has released a trading update confirming that it is trading in line with 2016 expectations. The dividend has been maintained, which is currently yielding 11% (trough cover of 1.2x 2017). The NAV is 184p, which also provides significant freehold asset support. However, we are reducing our 2017 and 2018 forecasts, which drives an 6% reduction in REVPAR in 2017 vs. our previous assumptions and is largely occupancy driven. We also factor in additional corporate costs to support the growth with the room count +35% since IPO factoring in Waves and its latest management contract.

§ Pre closed statement: Elegant Hotels in a trading update this morning has indicated that 2016 results will be in line with market expectations. The H2 dividend of 3.5p will be paid in February 2017.
§ Key positives: The strategy remains intact with Colony Club recently refurbished and responding well despite difficult market conditions. Management have also announced an in principle agreement to a management contract in Antigua, which should expand in an asset light way with an estimated 3-year payback. There was no impact from Hurricane Matthew as Barbados is relatively sheltered from such weather relative to other islands. In H2 2017 there is also the England cricket tour, which could help improve trends in our view.
§ Key challenges: Bookings are c-5% YOY, albeit trends have recovered post the pre booking season. While UK consumer confidence appears buoyant post the Brexit vote, the uncertainty leading up to this did have an adverse impact with £/$ weakness making the product c20% more expensive. Management have also invested in the cost base longer term, especially as we envisage further management contracts making its future growth asset light and therefore ROCE enhancing.
§ Forecasts: We are cutting our 2017 and 2018 EBITDA forecasts by 29% and 24% respectively. The impact on EPS is slightly softened as we update our $ rate assumption from 1.42 taken on 14 June to 1.21 at the current spot rate. The key driver behind the downgrades is occupancy (being responsible for 70% of EBITDA downgrade in FY17) as our group assumptions fall from 68% in 2017 to 60% with 2018 falling from 69% to 64%. Rate reductions form 24% of the EBITDA downgrade in 2017 with the remainder being driven by new cost increases, namely labour and corporate overheads to support a larger business.
§ Investment view: While the earnings downgrades to 2017 and 2018 are disappointing, we do believe this has been priced in with the stock on a P/E of sub 8x 2017. There is significant dollar asset backing and yield support at current levels with the intrinsic equity value heavily discounted in our view. The company trades at a 46% EV/EBITDA discount to the sector at the current price.

[lbo] 14/10/2016 09:06

If they spelt it out how would they suck in buyers for the shares Vision Capital want to dump

[eezymunny] 14/10/2016 08:59

It's a ridiculous trading statement. Just spell it out for gawd's sake. They say bookings slightly behind last year. The new Waves hotel added about 14% to number of rooms, which suggests other hotels are down c. 15% lfl. Not very good but not very surprising I guess. Explains the steep drop in eps f/c from Zeus.

[che7win] 14/10/2016 08:43

New management contract expected to be earnings enhancing:"This will be Elegant Hotels' first property outside Barbados and its first management contract, and it is expected to be earnings enhancing in FY18"I wonder how this works? It will be marketed as an Elegant hotel with all the advantages of negotiating with the travel airlines, I can see more of these happening.

[wjccghcc] 14/10/2016 08:30

salchow, not saying it's a bad investment. I think management are doing a good job in a bad situation. Just flagging the downside.

[lbo] 14/10/2016 08:25

To decide on paying the dividend. The Zeus note from a house broker on falling eps and rising corporate costs says it all. Not sure management have been prudent at all.

[salchow] 14/10/2016 08:21

LBO - they should have waited for the six weeks after Christmas for what? To issue a trading update!!!!

[lbo] 14/10/2016 08:17

They should have waited for the major selling period for the tour operators in the UK ie the six weeks after Christmas but the only real good news they had now was holding the dividend to dress up the profit warning.

[che7win] 14/10/2016 08:08

Which is why I highlight a halving of the dividend still results in over 5% dividend and Barbados talks about devaluing.

[salchow] 14/10/2016 08:03

WJCCGHCC - then at each 10p fall I will just add another tranche. It's called pound cost averaging. Barbados will not disappear! One day the pound will get stronger if that really matters to most of the people who visit Barbados.

[lbo] 14/10/2016 08:02

They knew if they cut the dividend now the share price would plummet further so they held it. Not sure this was prudent with sterling continually falling and a hard Brexit now on the cards starting early next year and lasting up to 2 years. Also the IMF having to go into Barbados is not a positive for Barbados asset values.

[wjccghcc] 14/10/2016 07:55

30% downgrade in EPS forecast for next year by Zeus. Dividend remains covered (just) but any further £ weakening or UK consumer downturn may well put it under threat. You don't get a dividend yield of 10% without any risk...

[che7win] 14/10/2016 07:54

Yes, I'll pick up that yield all day long.Pound falling, there is talk about Barbados devaluing its currency, if that happened our costs would decrease considerably and profits rise.Don't forget that US accounts for 1/3rd of travellers.

[nw99] 14/10/2016 07:48

Great yield

[salchow] 14/10/2016 07:43

Well after 50 years investing I noticed from my in box that there was an RNS this morning and immediately thought "this will be good". I wonder why some people like me see the positives and others only see the negatives in any share. I don't expect to see it go shooting ahead but I am very happy to hold for the next 10 years (even though I am 72). Have those who see the negatives even been to Barbados. I have. It is fantastic and we hold luxury hotels. Short term negatives are an utter irrelevance. Barbados will always bounce back.

[dlku] 14/10/2016 07:38

pound tanking against dollar which will reduce travellers and hit room utilisation

[che7win] 14/10/2016 07:21

I'm most happy about the dividend, it's reiterated, even if it was cut in half, the yield would be 5% here, but currently over 10%.Only negatives are flat revenue and central overheads, but the market was pricing far worse at these prices.Surely should trend up to 100p now, well oversold.

[che7win] 14/10/2016 07:18

And a New Management Contract, they said there was potential for these kind of deals:"The Company is also pleased to announce today that it has reached an agreement in principle to bring a 123-room luxury hotel in Antigua into Elegant Hotels' portfolio under a management contract (the "New Management Contract"). The hotel is currently under construction and is expected to open its doors in mid to late 2017. This will be Elegant Hotels' first property outside Barbados and its first management contract, and it is expected to be earnings enhancing in FY18. The Board believes that management contracts of this kind represent a compelling opportunity to expand beyond Barbados, given they require far less capital investment than full ownership, and is therefore considering a number of other similar targets."

[che7win] 14/10/2016 07:07

A good update, was there a leak yesterday?Anyway, regardless, this should bounce well today.

[gucci] 13/10/2016 16:38

Chart curving up here

[lbo] 11/10/2016 08:14

The market may also be pricing in a cut to the dividend.

[che7win] 07/10/2016 19:47

Yes, and in June we were at 110p, now at 66p.They have pledged 7p dividend, so it yields 10.5% here, covered 1.34 times, 2017 PEG 0.25.Even if tweaked down, it looks an interesting play. That dividend converted into sterling will cost them less.

[lbo] 07/10/2016 17:20

Not sure. Zika issues, Brexit and a continued collapse on sterling has got worse not improved since Elegant hotels first warned on trading in June.