Elegant Hotels Group Live Discussion

Ripley94 17 Sep 2019

Snowman suggestion sxx board EHG… XXXX Barbados… be a different sort of investment

Gunnergadin 24 Aug 2018

I guess no news is good news As per Simon Thompson in the IC:- "There hasn’t been any news flow from the company since the half year results in mid-May when I interviewed the directors. investorschronicle.co.uk – 22 May 18 Elegant Hotels on track for recovery Expect a bounce back in profits for the largest operator of luxury hotels on the Caribbean island of Barbados, and potential for bid interest too. I would point out that three months ago around 95 per cent of revenue for the financial year to end of September 2018 was covered, so I would be surprised if the company doesn’t hit house broker Zeus Capital’s prediction that underlying pre-tax profit will rise from $11.1m to $12.4m to deliver EPS of 10.7¢ (8p). Investors may have reacted to the slide in sterling against the US dollar given that profits (2018/19) are heavily weighted to the winter months, and a high proportion of tourists to the island are from the UK. That’s more than priced in with the shares rated on 9 times likely earnings for the 12 months to end September 2018, and trading on half book value of 199c (155p at current exchange rates). Also, the rational for a rise in pre-tax profits in the 2018-19 financial year has substance after factoring in the greater contribution from the Treasure Beach hotel which only re-opened in December 2017 so late in the season. There is value on offer here."

TX2 22 Aug 2018

I guess no news is good news Not really!Based on 1st half results I would expect profits,in US$, to be about 10% lower than last year. With 70% of guests from UK I would expect continued pressure on margins next year based on present £/$ exchange rates. The claimed NAV is in my opinion something of a fantasy as the return on capital at book figures does not justify the valuation. The shares seem cheap but for a reason;namely returns & prospects are “modest”.There is likely to be a 2.66p final which is a saving grace. I have held these shares in the past but at the moment can’t see anything to give them a boost.

Gunnergadin 22 Aug 2018

I guess no news is good news Anyone got any ideas why this one is sinking slowly?

IOMINVESTCOM 13 Feb 2018

Couple of 400k trades gone thru Interesting to see the above at 86p today.Maybe a Institutional shuffle or topping up by someone.atb

r21442 18 Jan 2018

IC Bearbull analysis Apologies in advance the tables won't format......Shares in Elegant Hotels (EHG) also have attractions that come with reservations. They offer a level of asset backing that’s usually reserved for the best hidden-value situations. Against a share price of 92p, the book value of net assets is 93p per share, comprising mostly the value of the seven freehold hotels that the company operates in Barbados. That’s about equal to the share price, but management believes that underlying net asset value (NAV), which reflects the current market value of the hotels, is 163p per share. It is only rarely that the London market offers shares in a fully functional and decently profitable company at such a discount to NAV – 44 per cent.Yet, Elegant’s profitability (see Table 2) may be illusory. Its profit margins are fine, but it has to employ so much capital to generate its revenues that return on capital – arguably the ultimate arbiter of value – is quite ordinary. Depending on how it is calculated, return on equity averages around 8 per cent, which is lower than most shareholders would find acceptable. The alternative explanation is that Elegant’s assets are overvalued, thus depressing returns to capital. Table 2: Heritage - becalmed in the Caribbeanyear end Sept 2014 2015 2016 2017Revenue 57.6 60.1 57.0 59.9Operating profit 16.6 19.1 16.2 13.6Profit margin (%) 28.7 31.8 28.4 22.7Operating cash flow 16.7 11.4 17.0 12.5Capital spending -7.9 -3.5 -9.7 -5.4Free cash flow 8.8 7.9 7.3 7.1Dividends paid na na -9.5 -7.9Occupancy rate (%) 68.9 68.4 62.9 63.9Daily rev per room ($) 243 255 238 227Source: Co accounts; data in $m except where stated Granted, Elegant’s upscale hotels produce room rates to die for (Table 3), but those come with high fixed costs, static occupancy rates and gently falling revenues per room. It does not help that Elegant depends heavily on cash-strapped UK holiday-makers for custom. Worse, the company is currently incapable of generating enough cash to sustain the dividend. Table 2 also shows that, barring a surge in free cash generation, Elegant’s dividend was unsustainable and its bosses acknowledged as much when they cut the payout by 25 per cent for the year to last September and warned of a further 24 per cent cut this year. Table 3: How Elegant compares Elegant Hotels Meliá Hotels International Millennium & CopthorneNo. rooms 588 79,764 37,022Occupancy rate (%) 63.9 71.7 71.8Ave daily rate (£ 262 99 107RevPAR (£ 168 72 77Source: Co accounts; £1=$1.35=€1.13 There remains the hope that Elegant, a minnow among quoted hotel operators, may become a mouthful for a predator; it was in talks – now abandoned – with Spanish resort hotels operator Meliá Hotels International (BMAD:MEL) late last year. Others may sniff around. That, however, is not sufficient reason to hold the shares. Nor is the case much enhanced by the ostensible discount to NAV, since that asset value – whatever management may say – looks open to question. Certainly, I struggle to find value much above 70p per share when I crunch valuation numbers; this despite the substantial capital spending that management has been doing. I will have to find my value elsewhere.

r21442 15 Jan 2018

Thomson (not bearbull) update in IC I had an informative results call with Sunil Chatrani, chief executive of Elegant Hotels (EHG:91p), the largest operator of luxury hotels on the Caribbean island of Barbados. As I highlighted when I rated the shares a buy at 87p in the autumn ('Hitting target prices', 18 Oct 2017), trading was affected in the financial year to the end of September 2017 by a number of factors, the most significant of which was the sharp fall in sterling. This impacted the spending power of UK visitors, accounting for 80 per cent of Elegant Hotel’s customers, and meant that the hotelier needed to discount its rates in a sensible and controlled manner to maintain bookings from this important segment of the market.Cash profit declined from $19.6m (£14.5m) to $18.1m in the 12-month period and with net borrowings up from $61.8m to $73.1m, largely due to the $10.6m spent on the purchase and refurbishment of the 35-suite Treasure Beach Hotel, the interest bill increased as did the depreciation charge. The net result was the pre-tax profit declined from $14.2m to $11.1m, and EPS fell from 13.1¢ to 10.1¢.The board’s decision to cut the final dividend to 1.75p a share, giving a full-year payout of 5.25p a share, down from 7p a share in the previous financial year, was taken so that cash flow could be freed up to take advantage of acquisition opportunities, one of which is in the advanced stages of discussions. House broker Zeus Capital is pencilling a rebased payout of 4p a share in the 2017-18 financial year as the new norm, based on pre-tax profit and EPS recovering to $12.4m and 10.7¢, respectively, albeit this is well shy of previous estimates. On this basis, the shares are currently rated on 11 times earnings estimates, and offer a 4.4 per cent forward dividend yield.Importantly, I feel there is still a good chance of a profit recovery this year as the company will have the benefit of income from Treasure Beach, which opened in December, and management contracts won in Antigua. In addition, the company is targeting more affluent visitors to the island from North America to compensate for the subdued demand from the UK.Interestingly, Spanish hotel operator Meliá Hotels International (BMAD:MEL) made an unsolicited approach for the company, undoubtedly attracted by the 44 per cent share price discount to net asset value of 163p. Discussions have since been terminated, but I would not rule out other operators circling. So, although the holding has flatlined since I recommended buying the shares at 105p when the company floated on Aim ('Checking into an elegant investment', 15 Jun 2015), and that’s after taking into account of 14p a share of dividends banked to date, I can see upside potential, especially if corporate activity ensues. Buy.

TX2 10 Jan 2018

Re: IC's Bearbull column to analyse EHG next... Low occupancy due to seasonal nature of holiday trade in Barbados;however it does make it more difficult to earn a decent return on assets.Not totally convinced it will greatly increase its US trade-a huge number from the colder states seem to want to travel on winter cruises ;not too sure either how easy it will be to replace older repeat customers as they depart to" another place" with one off visits of under 40's either.Do the hotels tick their boxes?Not sure,it is a few years since I have seen them however.Cuba is perhaps more exciting.......and cheaper.I think it will be a struggle to maintain profits.

r21442 10 Jan 2018

IC's Bearbull column to analyse EHG next week Meanwhile, the value play – and perhaps the most interesting – is Elegant Hotels (EHG), which owns and runs hotels in Barbados. Coincidentally, Elegant, in which leisure industry entrepreneur Luke Johnson is the largest shareholder with 12.5 per cent of the equity, announced results for 2016-17 this week. They made uninspiring reading, chiefly because they came with a 25 per cent cut in the dividend – never good for a putative income stock – and the intention to cut another 24 per cent in the current year. That would leave a payout of 4.0p, which would produce a 4.6 per cent yield – acceptable for the income portfolio – with the share price at 88p.The question is whether the price will dip lower. It had been buoyed by takeover speculation, which turned out to be an aborted approach from the Spanish resort hotels operator Meliá Hotels International (BMAD:MEL). Meliá cannot now return for six months, but the price may be supported by its discount to underlying net asset value, which management puts at 163p a share. True, that discount looks so wide – 46 per cent – as to strain credibility, especially as occupancy rates for Elegant’s seven hotels look low (64 per cent). It doesn’t help that Elegant primarily relies on increasingly hard-pressed Brits for custom (almost 80 per cent of its revenue) and prices in US dollars. Still, maybe because I like bricks and mortar – or the Caribbean equivalent – to underpin my investments, Elegant is the one to which I’ll give first attention. More on all of these next week.I will post it up here when it is out.

IOMINVESTCOM 09 Jan 2018

Paul Scott's view Elegant Hotels (LON:EHG)Share price: 85.5p (down 10.9% at 08:32 today)No. shares: 88.8mMarket cap: £75.9m(at the time of writing, I hold a long position in this share)Results - for year ended 30 Sep 2017. This company is;...the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados.It listed on AIM in May 2015. This is a rare exception to my usual (personal) blanket rule not to invest in overseas companies on AIM. The reasons being that it's profitable, has freehold property assets, pays divis, seems to have sensible management, and operates in a country which seems to be politically & economically stable.Its major shareholders list is pretty impressive too;5a548275e0afcEHG_shareholders.PNGResults today have clearly underwhelmed some people, as the share price down 10.9%.Dividends have been reduced today, which could have upset some shareholders. Although as I flagged here on 12 Oct 2017, the company was clearly over-paying, so a cut in the divi was to be expected. The final divi this year will be 1.75p (PY 3.5p). The 2018 divi will be 4.0p, split one third: two thirds between interim & final. That will still give a pleasing yield of 4.7%, and looks a much more sensible level of payout. So personally, I'm absolutely fine with this. I'd much rather the company sensibly balances its divis and capex, rather than paying out too much in divis and starving its hotels of capex.Some key numbers for 09/2017;Revenue up 5.1% to $59.9m - with one additional site.Adjusted EBITDA down 7.6% to $18.1m - so nicely cash generative, but we do need to take into account maintenance capex, which is heavy for hotels.Adjusted profit before tax is down 22% to $11.1mAdjusted basic EPS is down from 13.1c last year, to 10.1c this year (converts to sterling of 7.5p). Note that there doesn't seem to be any potential dilution from share options, since the basic & diluted EPS figures are the same.At 85.5p share price, the 7.5p EPS results in a PER of 11.4EPS seems to have come in below the $0.11 consensus shown on Stockopedia. However, Zeus Capital says in an update this morning that the result is slightly above its expectations.Forex - this is the key issue for the company, which we already knew about. Something like 70% of the company's revenue comes from British tourists, but its costs are in US dollars. So the devaluation of sterling has been a headwind.The company gives refreshingly clear guidance about this issue;This was the first full year of a rebased Sterling/USD exchange rate. As a result, given Elegant Hotels' rates are priced in USD while the majority of its customers are from the UK, it has been necessary for the Group to discount rates at certain of its properties on a targeted and tactical basis. This has inevitably affected the profit margins of the business, but the Group believes that the pricing environment is now much more stable. As such, these market conditions should be seen as the new normal.Balance sheet - as you would expect, since it owns freehold properties, the balance sheet is dominated with PPE (property, plant & equipment), of $183.7m. Hotels don't tend to have much working capital, so the only other big item is borrowings, with net debt being $73.1m. That seems a fairly conservative level of gearing, on a loan to value basis of 39.8% - assuming that properties are actually worth book value.Zeus Capital say that the freehold properties were valued at more than book value in 2016, and quote a NAV of 163p. I'm a bit sceptical about valuations on hotels, as they often don't seem realistic.Looking at book values on the balance sheet, net tangible assets of $109.7m converts to £81m, which is higher than the market cap of £75.9m. So providing you're happy with the book value of the freeholds, then this share appears very solidly underpinned.It would be worth checking out the terms of the l

IOMINVESTCOM 09 Jan 2018

Re: Penalised for dropping the divi? Hi R21442,Yes, disappointing on the yield & dividend front after enjoying close to 10% yield but with the headwinds of the USD/£ rate, discounting to the UK visitor and the need to keep in the hotels in good condition it does make sense for longer term.I see next years 4p full dividend will yield 4.5% at the current price - I'm hoping the targeted discounting of the different hotels and expanding to the US & Canada will generate further growth. The drop in these result figures may explain on further researching why the takeover stumbled early on.atb

r21442 09 Jan 2018

Penalised for dropping the divi? Probably sensible given that it was probably too high on previous year base and no outlook for exchange rate improving? Here's hoping for more expansion this year.

IOMINVESTCOM 13 Dec 2017

‘BuyÂ’ Elegant Hotels on flight boost ‘Buy’ Elegant Hotels on flight boostLiberum believes 8%-yielding Elegant Hotels (EHGE) can receive a boost from Virgin Atlantic’s launch of direct flights from Heathrow to Barbados, starting today.Elegant Hotels operates seven resorts in Barbados, where 11 Virgin Atlantic flights a week will now land, from three UK airports.Analyst Wayne Brown rates the shares a ‘buy’ on a £100p price target. The shares fell 2.2% to 84.6p yesterday.‘The shares offer an 8% dividend yield, and valued at c.33% discount to our net asset value calculation,’ he said.‘The market share the group commands on Barbados, its sales and marketing office and its significant asset-backing all support a much higher valuation, let alone the opportunity to see material earnings upgrades over the next few years.’[link]

IOMINVESTCOM 04 Dec 2017

Offer made but terminated. or Immediate Release4 December 2017Elegant Hotels Group plc ("Elegant Hotels" or the "Company"Confirmation of approach for Elegant Hotels Group plc and Termination of TalksThe Board of Elegant Hotels notes the recent press speculation concerning the possibility of an offer being made for Elegant Hotels.The Board of Elegant Hotels announces that it had received an approach from Melia Hotels International SA "Melia Hotels" relating to a possible all cash offer for all of the issued and to be issued share capital of the Company which may be made by Melia Hotels or one of its investment affiliates. The Company further announces that discussions with Melia Hotels have now been terminated, and that Melia Hotels does not intend to make an offer to acquire the entire issued and to be issued ordinary share capital of Elegant Hotels.

IOMINVESTCOM 03 Dec 2017

Re: Takeover bid - FYI comments made Sept 16 by SCSW on NAV at that time.Astonishingly 70% of visitors to the island are from the UK via tour operators but Elegant has also opened its own office in the US to open new markets. Recent trading has been weak due to Brexit concerns and also the Zika virus, reducing appetite for luxury holidays and H1 occupancy dipped from 71% to 69%. This cast a tall shadow over the shares, which stand at 77p against the property assets worth US$257m. If you strip out US$59m debt that equates to a NAV of US$198m or 158p, having improved as a result of the sterling depreciation post Brexit. Eps benefits similarly from FX.The shares, which yield 10%, have a gaping discount to NAV. With eps forecast to rise from 13.3 cents to 16.5 cents, weakness because of current nerves is a wonderful chance for a bidder to buy trophy assets. Directors are adding. Buy.