Zeus Capital Head of Research Mike Allen caught up with DirectorsTalk to discuss Action Hotels PLC (LON:AHCG)
Q1: Mike, I’d like to talk to you about Action Hotels PLC. They posted some pretty good H1 results, can you talk us through the highlights?
A1: Yes sure, so they delivered a very robust set of half-year results for the six months to 30th June. They’ve increased the number of operating rooms by 30% versus the same period last year and despite the heavy investment that they’ve made in a number of hotels they’ve increased their adjusted EBITDA by 18% year on year. Cash generation is very strong so we noticed a good uptake in cash conversion there, mainly owing to the strong working capital performance, and the interim dividend was ahead of last year as well which signals to us the ongoing confidence from management in this business. Importantly as well, property value has also increased during the period to $428 million which results in a very strong NAV at the moment as well which is based in dollars and equates to about 96p.
Q2: Why do you think Action Hotels is attractive?
A2: Well there’s a number of reasons for this really, we think in the strategy that they’ve adopted should deliver very good structural growth so they’re looking at the more budget hotel area in the Middle East, we truly believe there’s an under supplied area of the market. Management team are excellent as well and have executed very good strategy to date and the economics of these sites are quite compelling as well so the average breakeven occupancy is around 30% which we think is very attractive for a roll-out model and it’s also very well asset-backed.
Q3: Finally then, what can you tell me about their trading outlook?
A3: I think the outlook is confident, they are expecting to trade in line with our expectation so we’re not changing any numbers off the back of this. I think they’ll continue to impress given the strong market dynamics that they see at the moment so yes, still very confident.
