Elegant Hotels Share Discussion Threads

[lbo] 11/1/2018 13:46

The interest rates are floating and rising and also Loan amortisation of $5.2m per year commenced in February 2017

[trytotakeiteasy] 11/1/2018 12:45

LBO - we shall see. I haven't looked at it closely and I will need to have a look at the covenants. I think the debt needs to be refinanced in 2020. Profit and cashflow cover of interest payments looks strong unless I am missing something. I'll post some thoughts when I have looked more closely. I think you could look at things the other way and say in the worst year they are likely to have for sometime there were still profitable and had reasonable cashflow. I.e. Glass half full or empty.

[stemis] 10/1/2018 17:20

I do also suspect some funds may be needed urgently to refinance the bank debt and remove the risk of being seen to be breaching banking covenants with a Debt to EBITDA ratio at 4x.

So what are the covenants?

[lbo] 10/1/2018 13:23

Luke is now a NED so he would have to make an RNS if he bought over 0.5% on his current shareholding and considering the CEO is saying they are in advanced negotiations on an acquisition then I also suspect Luke is restricted from buying. I still think some sort of discounted fundraising is going on and they needed to get and keep the share price up close to the old IPO price hoping to try get those original investors to subscribe. Problem is the dividend has been cut now and profits are way down since the IPO and I suspect if they do get a fundraising away it will be at or below the price Luke bought his shares off Vision Capital. That would also suit Luke if he wants also subscribe for more shares unless of course he is trying to sell/reverse something he already owns into Elegant that is.Suppose it all really depends on where the money they plan on raising is going. I do also suspect some funds may be needed urgently to refinance the bank debt and remove the risk of being seen to be breaching banking covenants with a Debt to EBITDA ratio at 4x.

[lucicavi] 10/1/2018 09:12

Luke Johnson buying? Well bid

[lbo] 10/1/2018 09:08

Yes that's possible but I would think other hotel operators would be more interested in looking at underlying EBITDA and valuing hotels on a EBITDA multiple. I would also guess that when CBRE carried out its valuations on the Elegant properties back in 2015 and when underlying EBITDA was higher this would also have led to a higher property valuation unlike today. I also note book value of the properties is substantially lower. Very odd the accountants have not made them restate that when they seem to keep claiming the property values are so substantially higher based on a old 2015 CBRE report. Also odd when you apply the post refurb per room valuation of recent acquisitions to the rest of the rooms in Elegant (not all which have been refurbed yet) then you only come up with a market value similar to the book value.

[lbo] 10/1/2018 08:55

Yes it could see a start of a recovery this year or Brexit could cause more trouble for the UK economically and sterling could fall further. Nobody knows. But what we do know is that while UK visitors remained stable to Barbados over the last year or so the occupancies, Revpar and EBITDA all fell at Elegant Hotels. Also yes debt may have fallen (mostly on the back of some of the IPO) but would have fallen by very little by organic cash flow if they had not re-leveraged up since IPO and bought more hotels in Barbados and increased room count significantly as profits would have plummeted even more substantially in the underlying business that they had IPO and also needs ongoing Cap Ex going forward.

[albanyvillas] 10/1/2018 08:46

Trading at well below half NAV this is going to get bid for

[trytotakeiteasy] 09/1/2018 18:37

LBO - Yes that is a fair point. I did say that and they have cut the dividend. However, I did also think that a dividend cut was a possibility. My overall thesis is that this company has had two tough years. This year should see the start of the recovery. You are correct that debt has gone up but without buying hotels it would of gone down I think. Also without the large dividend payments it would of gone down. I don't see this as a company in a tough financial situation. But you could be right and I could be wrong.

[trytotakeiteasy] 09/1/2018 18:37

LBO - Yes that is a fair point. I did say that and they have cut the dividend. However, I did also think that a dividend cut was a possibility. My overall thesis is that this company has had two tough years. This year should see the start of the recovery. You are correct that debt has gone up but without buying hotels it would of gone down I think. Also without the large dividend payments it would of gone down. I don't see this as a company in a tough financial situation. But you could be right and I could be wrong.

[lbo] 09/1/2018 18:13

I never said the company was "doomed". I just highlighted the many issues that they have tried to conceal and obviously they no longer can and thus what others highlighted and I pointed to is now all coming out. The fact remains the net debt to EBITDA RATIO is now at 4x which is worse then was ever forecasted over a year ago when 3.5x would have put them in danger territory and when Liberum still did not believe they would breach their Banking covenants. But now they are 4x and we are all reminded of what balance sheet rebooting was being referred to late last year.May I remind you not so long ago you said on here "if they can maintain the 7p dividend then it should at least hold its own" and here we are less then 2 months later and it's been slashed.

[trytotakeiteasy] 09/1/2018 17:52

LBO - you could be right on all of this. The trouble is you don't sound very impartial and don't seem to give a balanced or fair view. You seem to come across like Captain Fraiser in Dad's Army "EHG Hotel Group is doomed... doomed I tell you". A lot of people said that about Apple a while back.. Apple is doomed.. it almost became a catchphrase. The CEO of Dell said that Apple should be shut down and the money returned to investors. Apple is now the world's largest company. It is ok to have a negative slant but it is worth trying at least to have a fair and balance view!!!!!!! Otherwise it becomes quite tiresome.

[lbo] 09/1/2018 16:21

No I am not the source of the rumour. Just like I was not the source of the rumour behind the dividend cut which has now proven to be true. Or the source of the multiple profit warnings and the repeated slashing of profit forecasts which again have proven to be all true.

[shauney2] 09/1/2018 16:07

So that rumour was your rumour LBO.It could well happen but it was your rumour lol
You gotta love the AIM market!!!and ADVFN

[mortimer7] 09/1/2018 15:56

LBO, Your tenacity is undiminished. Well played.

[lbo] 09/1/2018 15:34

Yeah "if the company will be able to get a discounted equity fundraising away if they don't pump it up near to the IPO price" Which they now finally have managed to do after all the profit warnings and forecasts being slashed over the last year and by some very questionable timing and then the leaking of a supposed takeover offer that never materialised and then saying the dividend is maintained late last year and then later saying its slashed in the New Year. You gotta love the AIM market!!!

[stemis] 09/1/2018 15:33

What are the debt covenants?

[mortimer7] 09/1/2018 15:24

LBO you were speculating about a discounted fundraising way back in April 2017 (which didn't happen).....

LBO - 07 Apr 2017 - 11:58:22 - 533 of 725 Elegant Hotels - EHG
But it's ok to try and ramp! Maybe some insiders posting on here are nervous if the company will be able to get a discounted equity fundraising away if they don't pump it up near to the IPO price

[lbo] 09/1/2018 14:55

Yes many would agree it should have been cut ages ago especially when it was forecasted back at end of 2016 that net debt to EBITDA would only reach 3.5x and even then was in danger territory but Liberum did not believe debt covenants would be breached yet now the company is at 4x.

[trytotakeiteasy] 09/1/2018 14:38

LBO - if the balance sheet was really stretched they should have cut the dividend to zero sometime ago.

[lbo] 09/1/2018 14:03

You might not see the balance sheet as stretched but the bank and banking covenants have different views. Net debt to EBITDA is now 4x which is seen as stretched

[trytotakeiteasy] 09/1/2018 13:38

LBO - I don't see the balance sheet as stretched. We had one of the toughest years for the group but they had net finance expenses of $2.8m versus operating profit of US$13.8m. How is that stretched? If the balance sheet was stretched how were they able to buy two hotels over the last couple of years? I can't see there being a question that they will be able to cover the interest bill. The only issue is refinancing the debt over time as it falls due.

You state that the balance sheet is stretched but that they are also set to buy another hotel. How are those two things compatible? Talk of a discounted fundraising is just scaremongering. The dividend cut could be positive if they can use the spare cash to buy cheap assets.

[lbo] 09/1/2018 13:29

Was also discussed before Christmas about the balance sheet not being in great shape and some hinted it needed to be rebooted. We also know it's debt is US denominated and the interest rate is floating so interest payments are now rising. We also know "Loan amortisation of $5.2m per year commenced in February 2017"

[mortimer7] 09/1/2018 12:57

LBO, I've listened to an interview this morning with Sunil Chatrani wherein he states the board are in advanced discussions with regards to an acquisition. He goes on to say, we are constantly managing cashflow & debt availability in order to ensure we can take advantage of them (acq. opps) as they present themselves.

However there is NO mention of discounted fundraising.
Can you disclose your source please?

[shauney2] 09/1/2018 12:46

I think you may have had trouble selling 7k in one go anyway.I have less than you and sold at 90p in 2 lots with A J Bell after trying to sell in one go.