MCK - Millennium & Copthorne Hotels.

[Leemsip]

Mogul, Im also in. Going to bottom draw this and look again in 5 years.

[Southern Lad]

[QUOTE=Mogul;808616]This week I have taken a modest position in Millennium and Copthorne (MCK) as a counter cyclical deep value investment. Share price $1.80 for ordinary shares (or $2.00 for preference shares) vs net asset backing $4.52 per share. MCK has no net debt, in fact net $98 m in bank, so no liquidity issues and potential to either acquire more properties at deep value or buy back shares.

Of that net $98m in the bank, a net $54m of this sits with CDI. While MCK may be able to get their hands on 66.26% of this via their shareholding, the other 33.74% (equivalent to $18.2m) belongs to the CDI minorities.

MCK could of course sell or wind down CDI - either would unlock significant cash for MCK.

[Arthur]

Their other hidden asset is their failed hotel in Australia. They have converted it into "Zenith" apartments are are slowing selling them. https://australia.trovit.com/propert...th-potts-point

[Beagle]

OMG ....MCK and what’s happening re virus and they mention EXISTENTIAL CRISIS

that’s bad

http://nzx-prod-s7fsd7f98s.s3-websit...116/318972.pdf

People were trying to tell me in February they were good buying at $2.50. Percy was on to it suggesting they might be good value at $1.50.
My updated view is that tourism will be gravely affected for MANY years to come and I expect at the minimum at retest of 5 year lows of $1.40.
Historical NTA for the tourism industry no matter whether its the theoretical historical value of planes, cruise ships or hotel's is rendered completly meaningless by a crisis of this magnitude.

It is an existential crisis, make no mistake. I commented in February, TA gave no encouragement. TA is your best friend at times like this and renders FA almost completely meaningless.

[percy]

Brierley Investments brought UK hotel chain Mount Charlotte,now Thistle Hotels.[Read their history.on Google].
What I clearly remember was Paul Collins stating they were a big mistake "as it took a very long time for hotels to return to their former value".
In fact I think Mt Charlotte was the investment that destroyed most of BIL's wealth.
From what I know MCK relied on mainly Chinese tour groups.Perhaps in 5 years time they may return to their former value,perhaps it will take 10 years.

[Beagle]

Sorry Mogul, I am with Percy on this one. Things won't return to anything like normal for MANY years. Half NTA is nothing when its comes to a long hard grind over such a long timeframe as most if not all your discount probably gets eaten up with operational losses. (Think AIR for a good analogy).

By comparison MET, another form of property investment. I have been buying at half NTA and they came out the other day and forecast underlying profit would be barely changed on last year...that's the sort of half priced NTA buying that makes sense to me in this recession. Its all about cash flow my friend.

[percy]

Hi Percy, I agree it is a long term investment and the 5-10 year timeframe you mention seems appropriate. For the hotel part of the business, it requires belief that over the long term tourism will recover in NZ. If tourism doesn't recover in NZ over a 5-10 year timeframe I would be very surprised. Having a strong balance sheet with $98 m net cash (albeit with $54 m of that held by 66.3% owned listed subsidiary CDL) a provides the ability to get through some leaner years. The CDL residential development business did well after the GFC and I think there is a good prospect of that happening again after 1-2 quiet years. Bottom drawer deep value long term hold for me.

Mogul I wish you well.I like cash flow.When we look at a company like EBO we see something like 10 stock turns,a year.I like to think of myself as CFO of any company I invest in.First thing I do every morning is see how much cash has gone into the bank account overnight.Cash means I can pay bills,staff wages,insurance,rent etc.No cash coming in, the business starves.Hotels without guests starve.A property development company lacks cash flow as it takes years from buying a property, to selling sections,and receiving cash.Cash going out developing roading,sewers etc is cash out,not cash in.
So my worst nightmare would be being MCK's CFO ,going to work every morning and just watching the cash going out,knowing it will be years before cash starts coming in.

[percy]

Fair enough. I’ll tell them not to call you if the CFO role comes up. I think Air NZ CFO role might be more stressful!

AIR CFO's job would have been great for the past few years,with all the punters paying for their flights, months before they took them.I would have been the first to work every morning,looking at all that money coming in every night..
Although I think I would have taken early retirement a month or two ago..
Jolly sure I would not have used my retirement funds buying a motel or hotel...lol.

[Balance]

Scenic Group are mothballing hotels to minimise losses for next 18 months, especially where they have two hotels in one location.

https://i.stuff.co.nz/business/12115...nd-franz-josef

I expect MCK will also employ this strategy to minimise losses. It seems a smart and simple plan whilst the tourism tide is seriously out. The have multiple hotels in Auckland, Queenstown, New Plymouth, Rotorua and the Bay of islands. So it would make sense to mothball some of these and possibly properties in other international tourist locations such as Te Anau. With staff costs gone and no net debt, the major remaining costs in mothballed hotels will be rates and insurance.

The tide is out but will come in again eventually. In the meantime we have smart management, no net debt and significant cash in the bank. Happy with this long term hold,

https://www.stuff.co.nz/business/pro...vid19-pandemic

MCK started doing it a month ago.

Going to be a very long road ahead for our tourism sector unfortunately.

[Sgt Pepper]

https://www.stuff.co.nz/business/pro...vid19-pandemic

MCK started doing it a month ago.



Going to be a very long road ahead for our tourism sector unfortunately.

There was an item on RNZ business a few days ago.It indicated that already one major hotel investment group was interested in potential acquisitions in NZ. I guess a counter cyclical investor prepared for several years of scant returns . McK a potential acquisition target as the only NZX listed hotel chain company??'
What are others opinions?