MCK - Millennium & Copthorne Hotels.

[Turtle2]

I am trying to calculate the fair value of NTA purchased with each MCK share. For this would I adjust the cost values of the development properties held by CDI and Zenith to fair value (approx 170m to 375m), and also take into account that MCK shareholders only 'own' 66.7% of CDI's NTA's? Have been doing some research on MCK and found this quite interesting, but am quite new so please correct me if I am wrong.

[Turtle2]

Was referring to the NZD 78.09m fair value that MCK placed on the Sydney Zenith Residences in note 11 of the financials, rather than the 52.2m cost value which is used in the statement of financial position.

[Turtle2]

Very interesting. Would you say the value is closer to cost then? Seems as though you know a lot about this!

[Turtle2]

No idea. Hence my interest in your assessment.

Even cost is a bit nebulous. Zenith apartments was previously operated as the Sydney Millennium Hotel. After taking external
advice it was decided to convert it to apartments for individual sale. The conversion did not go well; massive cost over-runs due
to the "discovery" of asbestos and subsequent delays and wrangling. So, take a starting cost price for the building, add large
development costs, add estimated sales costs, add a profit margin, now the apartments end up grossly overpriced for the market
and haven't sold. That's my take at least.

Thanks for the background. Wouldn't be able to add anything to that. For what its worth, based on the fair values in the financials I'd put NTA at $4.01 per share (based on 158m ordinary and preference shares), meaning they are trading at a 26.5% discount to NTA. Definitely seems like a large enough discount to cover any poor valuations or any correction in the property market to me.

[Jinx]

Really looking for some solid tourism diversification (other then thl) Mck is looking like a decent pick for this type of thing. Thoughts holders and watchers?

If anyone has any other tourism picks please post!
Thanks in advance!

[peat]

cant say the Palmerston North Copthorne was all that impressive this last weekend, but I do like the share. Revals could still occur and price is good relative to NTA.
The Auckland downtown is coming back on stream and the old Rendevous now being managed mid town
It needed to pull back from over the $3 mark and it did, so I am thinking a reasonable entry point.

[JoeGrogan]

Really looking for some solid tourism diversification (other then thl) Mck is looking like a decent pick for this type of thing. Thoughts holders and watchers?

If anyone has any other tourism picks please post!
Thanks in advance!

In my opinion fundamentally a great long term hold as liquidity can be an issue for short term holders. Book value well above share price, reasonable PE, growing sector, new hotel in Auckland CBD nearing completion (nearing may be the wrong word). One reservation is that they may find it hard to beat last years NPAT if CDL sales are affected by a declining property market.

Discl: Not currently holding, recently sold because of the liquidity issue. DYOR

[BlackPeter]

Half year results are out - and still improving on the 2016 result (which was popped up by a one off windfall).

https://www.nzx.com/companies/MCK/announcements/305046

MCK’s key results were:
• Average hotel occupancy across the Group 81.3% (2016: 82.3%)
• Group revenue and other income $104.14 million (2016: $95.71 million)*
• Operating profit before finance income $42.92 million (2016: $40.72 million)*
• Profit before income tax and non-controlling interests $43.91 million (2016: $41.08 million)*
• Profit after tax and non-controlling interests $24.23 million (2016: $23.79 million)*
*in 2016 there was a non-recurring gain of $4.31m from the Millennium Christchurch insurance settlement.

Only fly in the ointment I can see is the slightly retracting occupancy rate. Just wondering whether this is one of the early indicators that we as a country are milking the tourism cow a bit hard and starting to see the results to peak?

Just wondering whether this is an early indicator for the things to come for the whole tourism sector (THL and similar) ... MCK should be in that regard still pretty sheltered thanks to owning CDL (property development) as well as having less tourism (and more business) exposure than e.g. THL.

Discl: satisfied holder (small parcel due to low liquidity of stock);

[peat]

I like as well BP, but am still reviewing in detail.
Note that only half of the Lions Tour was in the period.
They say 1.9% incr in NPAT but if you take out that non-recurring insurance item from the previous half years accounts it was significantly higher.

However I am not certain whether we should take that out - there are a number of possibilities around this line item eg was it from a much earlier period ??
Also it could be (and should be from the insurers perspective) a genuine loss that would've been earned if not for the damage. so I'm still working through that...

[BlackPeter]

I like as well BP, but am still reviewing in detail.
Note that only half of the Lions Tour was in the period.
They say 1.9% incr in NPAT but if you take out that non-recurring insurance item from the previous half years accounts it was significantly higher.

However I am not certain whether we should take that out - there are a number of possibilities around this line item eg was it from a much earlier period ??
Also it could be (and should be from the insurers perspective) a genuine loss that would've been earned if not for the damage. so I'm still working through that...

as I said ... a solid result, not an outstanding result ; But they are still in my books with a P/E of 10.7 and a 11% CAGR - not too shabby, either.

As indicated - I don't think they are too dependant on the (cyclical) tourism sector, and there is still a shortage of beds across New Zealand, i.e I expect them to stay in the coming year "well positioned". Nothing spectacular, but solid.

If we are talking about investment, I like boring ... and this one fits the bill ;