Elegant Hotels Group PLC (LON:EHG) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview.
Q1: Elegant Hotels issued a trading update on Thursday, what are your thoughts on the statement?
A1: The trading statement was quite short, but it was very robust which confirms that it was trading in line with expectations to the full year to September 2018. Encouragingly, they also said their booking trends were ahead of last year which is encouraging as we enter the key trading period. They have added a hotel in that period, but we understand that the underlying portfolio is also ahead, so we take that as good news.
Q2: Does that change your forecast in any way?
A2: No, we’ve left our forecasts unchanged on the back of this update. We’ve assumed a sterling rate of 1.35 against current spot rate of about 1.29, we’ll look at that year-end, but the underlying assumptions are unchanged.
Q3: In terms of company valuation and perhaps as an investment, what’s your view there?
A3: We think the shares look very cheap at the moment, it’s trading on a September 2018 PE of 8.2 times, falling to around 7 times in 2019, they did rebase the dividend yield about a year ago and that’s now yielding 6% based on 2 times cover.
Also, the current NAV is 1.43 pence per share, that was the last reported NAV and based on a recent asset valuation. Longer term, we’d forecast the NAV to increase above 150 as the net debt starts to come down as well.
So, from a number of different perspectives, Elegant Hotels Group shares look good value to us.