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Beneath Action Hotels' volatile shares is a steadily growing business

With four new hotels in the portfolio, results from the group were strong.
April 18, 2016

A target of 5,000 operational rooms has moved a little closer for Gulf-based operator Action Hotels (AHCG). The group opened two new hotels in the Middle East in the reported period, where it is attempting to take advantage of the increased demand for affordable travel options. The Australia portfolio is also progressing well; acquisition of the ibis Budget Melbourne and the opening of the group's largest hotel, the ibis Styles Brisbane, in March, has led to a 30 per cent increase in room numbers. With a committed and fully funded pipeline of six hotels, the total room count is expected to reach a minimum of 2,650 by 2018.

IC TIP: Buy at 55p

New hotels are the main driver of growth and helped to boost adjusted cash profit by 42 per cent last year to $16m (£11.3m). With the business model allowing new hotels to break-even at 30 per cent occupancy, the majority of properties contribute to profits soon after opening. However, as investment in hotel development is expected to ramp up once again in 2016, it is likely that profitability will be somewhat dampened this year.

Broker Zeus Capital expects 2016 adjusted pre-tax profit of £1.3m and EPS at 0.5p, down from £3m and 1.3p in 2015.

ACTION HOTELS (AHCG)

ORD PRICE:55pMARKET VALUE:£80.4m
TOUCH:52-57p12-MONTH HIGH:65pLOW: 44p
DIVIDEND YIELD:4.1%PE RATIO:41
NET ASSET VALUE:133ȼNET DEBT94%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (p)
2011*25.2-3.8-3.8nil
2012*28.2-0.3-0.2nil
201329.8-7.1-9.00.96
201437.62.21.3**2.17
201543.53.01.8**2.21
% change+16+34+49+2

Ex-div: 28 Apr

Payment: 31 May

*Pre-IPO figures and pro-forma EPS £1=$1.42

**Adjusted EPS figures from Zeus Capital