As the only operator of affordable three and four star hotels in the Middle East, Action Hotels (AHCG) has had plenty of opportunity to expand. A 30 per cent increase in the total number of rooms helped send revenues in the reported period up by almost a fifth and when depreciation and amortisation (which leapt by a half due to the heavy investment undertaken in the period) were stripped out, adjusted cash profits rose 18 per cent.
The mature hotels continue to trade well, with occupancy levels maintained at 75 per cent and the two Kuwaiti hotels running at over 80 per cent. Low set-up and operating costs mean a hotel will break even at just 35 per cent occupancy, thus ibis Styles Brisbane - Action's largest hotel with 367 rooms - broke even in month two. The pipeline is also promising with another 384 rooms to be completed by the year-end, taking the total number of rooms to just shy of half of the 5,000-room target expected to be achieved before 2020.
While the current pipeline is fully funded, chief executive Alain Debare conceded that more financial help would be required for future growth. The period has seen the group eat into its debt facilities which resulted in a big increase in interest paid on loans - this finance cost hit the bottom line hard.
Broker Zeus Capital expects pre-tax profits of $1.3m for the year to December 2016, leading to EPS of 0.7ȼ, compared with $3m and 1.9ȼ in 2015.
ACTION HOTELS (AHCG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 56p | MARKET VALUE: | £83m | |
| TOUCH: | 54-58p | 12-MONTHHIGH: | 65p | LOW: 44p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | na | |
| NET ASSET VALUE: | 117ȼ | NET DEBT: | 120% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 21.67 | -0.56 | -0.50 | 0.74 |
| 2016 | 25.56 | -3.85 | -2.70 | 0.76 |
| % change | +18 | - | - | +3 |
Ex-div: 13 Oct Payment: 25 Nov | ||||
