Tip Update: Buy at 493.5p
- Tip style
- GROWTH
- Risk rating
- MEDIUM
- Timescale
- LONG TERM
- Our previous tip
- We said BUY at 360p on 17 Nov 2016
- Tip performance to date
- +37%
Fears over the rapid devaluation in the pound are continuing to weigh on Dalata Hotel Group (DAL). Weaker sterling deterred a number of British visitors from travelling to Dublin – a crucial city location for the company – although this was helpfully offset by higher tourist numbers from North America and continental Europe. In addition, the group’s UK hotels did well, thanks to the relative value on offer. As such, adjusted cash profits rose 27 per cent over the first half of 2017, as both total occupancy rates and average revenue per room climbed higher.
The group has been buying up and building hotels in Ireland and the UK, including the 300-room Clayton hotel in Manchester and the Maldron in Portlaoise. Overall, the group has spent €17.1m (£15.6m) on new builds and extensions, while also pursuing a room refurbishment programme. So far it's spent €5.7m, not including the €1.8m spent as part of the rebrand of former Clarion hotels to Clayton. Dalata is due to open another 1,280 rooms in 2018.
Analysts at Davy are forecasting pre-tax profits of €69.9m, giving EPS of 32.5¢ for the year to December 2017 (up from €44.1m and 19.1¢ in 2016).
| DALATA HOTEL GROUP (DAL) | ||||
| ORD PRICE: | 494p | MARKET VALUE: | £907m | |
| TOUCH: | 483.5-494.5p | 12-MONTH HIGH: | 494p | LOW: 325p |
| DIVIDEND YIELD: | - | PE RATIO: | 20 | |
| NET ASSET VALUE: | 355¢ | NET DEBT: | 27% | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
| 2016 | 130 | 18.2 | 8.5 | nil |
| 2017 | 162 | 32.7 | 15.5 | nil |
| % change | +24 | +80 | +82 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=€1.09 | ||||
IC View
Dalata’s numbers speak for themselves. The group is growing rapidly, net debt is lower than at its last update, while both room numbers and revenue per room are growing. Brexit may prove a challenge in the future, but at 17 times forecast earnings we think there's still room for upside. Buy.
Last IC View: Buy, 380p, 3 March 2017
