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easyHotels ramps up expansion

easyHotels ramps up expansion
January 14, 2016
easyHotels ramps up expansion

The site is located on Gran Via, the main avenue of L'Hospitalet de Llobregat, with easy access to the city centre and Barcelona Airport. It not only offers good transport links, with a train and Metro station adjacent to the proposed hotel, but is within walking distance of the Fira Barcelona Gran Via convention centre, and the Gran Via shopping centre, which has 180 shops, 24 cafes and restaurants, and a 15-screen cinema. Subject to planning permission, the total investment on the scheme will be about €15m (£11.3m). It makes strategic sense to expand in Spain given that Spanish customers already account for 5 per cent of all easyHotel guests, so there is growing awareness for the brand. Barcelona also offers a captive tourist market wanting keenly priced hotel stock.

The move into Spain also reinforces the detailed investment case I made last month when I advised buying shares in the heavily cash-rich and asset backed company at 83p, placing a conservative six-month target price of 100p (‘Check in for a profitable booking’, 14 December 2015). They are currently just shy of the 91p key resistance level, marking the post results highs in both mid-December and earlier this month, a breach of which would markedly narrow the odds of a move to my initial conservative target price of 100p.

I certainly wouldn’t bet against that possibility given the potential for further positive newsflow on the company’s hotel development pipeline. Mr Parsons was the former chief executive of leading budget hotel chain Travelodge which he grew to over 500 hotels in the UK, Ireland and Spain, so is highly experienced in rolling out an expansion programme in the budget hotel sector.

Indeed, the company has announced today that it has conditionally acquired a Grade II listed property situated adjacent to the principal retail area in Ipswich, which it intends to convert into an easyHotel. The purchase of the property is subject to easyHotel obtaining planning consent to convert the building into a 94-room hotel, which is expected to open in 2017. The total cost of the purchase and conversion of the building will be about £4m. The average cost equates to £43,000 per room, or 30 per cent below the average cost analysts have factored into their models. It's another positive development.

Trading on a bid-offer spread of 87p to 89p, I continue to rate easyHotel’s shares a buy.

Finally, I have published three investment columns today, and articles on 29 small-cap companies on my watchlist since the start of last week, all of which are available on my IC home page and are also listed in chronological order below.

 

MORE FROM SIMON THOMPSON...

I have written articles on the following companies since the start of last week:

Grainger: Buy at 243.5p, target 280p; Dart: Take profits at 580p; Crystal Amber: Hold at 159p; Redde: Take profits at 203p; Burford Capital: Run profits at 196.5p; Renew: Run profits at 404p; Plethora Solutions: Speculative buy at 4.5p ('Stock check', 5 Jan 2016)

Elegant Hotels: Buy at 118p, target price 130p to 135p ('Check in for a profitable stay', 6 Jan 2016)

Safestyle: Run profits at 272p ahead of pre-close statement on 25 Jan 2016 ('Clear cut gains', 6 Jan 2016)

Epwin: Run profits at 143p, new target 170p ('Epwin on the acquisition trail', 6 Jan 2016)

GLI Finance: Recovery buy at 37.5p ('GLI shelves fundraise and its chief executive', 6 Jan 2016)

LXB Retail Properties: Buy at 97.5p, new six-month target 120p; Urban&Civic: Buy at 286.5p, target 325p; Conygar: Buy at 172p, target 200p ('Hot property, 7 Jan 2015)

Somero Enterprises: Buy at 139p, target 185p; 1pm: Buy at 70p, target 82p; First Property: Run profits at 53p; Avation: Buy at 145p, target 200p ('Small-cap value plays', 11 Jan 2016)

32Red: Run profits at 147p; Netplay TV: Buy at 7p ('Chipping in', 12 Jan 2016)

Cambria Automobiles: Buy at 87p, new target 95p; Vertu Motors: Buy at 76p, target range 85p to 90p ('Motoring ahead', 12 Jan 2016)

Global Energy Development: Hold at 24p ('Cash rich, but unloved', 12 Jan 2016)

KBC Advanced Technologies: Bank profits and sell in the market at 183p (‘Tech watch, 13 January 2015)

Sanderson: Buy at 75p, target range 85p to 90p (‘Tech watch, 13 January 2015)

Trakm8: Buy at 300p, new target 400p (‘Tech watch, 13 January 2015)

Amino Technologies: Buy at 120p, new target range 155p to 160p (‘Amino has the ammunition’, 14 January 2015)

easyHotels: Buy at 89p, initial target 100p (‘easyHotels ramps up expansion’, 14 January 2015)

Stanley Gibbons: Hold at 58p (‘Stanley Gibbons fundraise’, 14 January 2015)

■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking