Originally Posted by
Snoopy
What NZ listed hotel groups trade above NTA?
Despite my 'downbeat post' on hotels in general, at some point the price of hotel shares will get so low that value is there - I grant you that. I don't count myself, these days, as a student of hotels, for the very reasons I espoused in the post of mine you have quoted. However, in case you haven't figured it out LEK, we are still very much in the 'Covid crisis' particularly as far as tourism is concerned. I think there is still a lot of uncertainty around when the NZ border will open to overseas tourists from further away than Australia, and what the hotel demand take up will be like when that happens. Some of the older hotels may yet end up as 'stranded assets', producing no income and unable to be sold for anything approaching their book value. That and Covid-19 era capex catch up for the hotels that remain operational are two very good reasons why the MCK hotels should be valued at a good discount to asset backing. The Zenith property development in Sydney is really a reflection of what can go wrong when an old hotel falls below today's consumer expectations. You may yet find this apartment development model being put to use in New Zealand next. In the interim that would be another drain on cash. Incidentally I don't consider MCK short of cash. Given the uncertainty of the timing of future CDI development sales, I would argue there is some uncertainty on the timing of future cashflows though.
I take your point about backing out the CDI property development shareholding to get a better grasp of the hotel part of the MCK group. And if the calculated discount to hotel asset value is, as you say, with the share price valuing two hotels for the price of twelve, we may very well be at enough of a discounted value to make MCK a good investment at today's market price.
My original response was in answer to the question from 'thebdog' on the general low value of hotel groups in relation to their asset backing over long periods of time. I wasn't challenging the thesis that the price of MCK may indeed have got so low that it offers value on the market today.
SNOOPY