MCK - Millennium & Copthorne Hotels.

[LaserEyeKiwi]

Things looking good in Queenstown - July apparently shaping up to being close to pre-pandemic levels.

(MCK has two large hotels in Queenstown)

https://i.stuff.co.nz/travel/news/12...pandemic-level

[Sideshow Bob]

Things looking good in Queenstown - July apparently shaping up to being close to pre-pandemic levels.

(MCK has two large hotels in Queenstown)

https://i.stuff.co.nz/travel/news/12...pandemic-level

But no staff…..

https://www.odt.co.nz/regions/queens...f-match-demand

[LaserEyeKiwi]

New Company leader announced, with extensive experience in property/REIT management.

MCK appoints Stuart Harrison as Managing Director

https://www.nzx.com/announcements/391646

[LaserEyeKiwi]

Trio of good news for Hotel sector today:

1) Border reopening brought forward to July 31st for all remaining countries (those not on the visa-waiver list) - from previous date of October.
2) Pre-departure testing removed from July 31st
3) Hotels will have a special lwoer wage rate vs. the new “minimum wage” being brought in for immigration work visas for “the time being” - meaning that if needed they can bring in overseas workers at a lower wage rates than previously expected.

[LaserEyeKiwi]

Very nice seeing the MCK dividend arrive in my account today!

[LaserEyeKiwi]

Notes from the MCK AGM today:

- Christchurch land sale was not planned, but received an unsolicited offer they could not refuse (because it was so good) $2m book value, $18m sale price. Company still has option to re-enter Christchurch market in future if it pleases at many other locations in the city would suit.
- Millennium Queenstown highest EBITDA contributor - struggle finding staff. Pooling resources of 3 Queenstown hotel assets to optimize operations in low staffing environment, and to attract conferences etc.
- Staffing the toughest issue by the sounds of it.
- Grand Millennium Auckland reopens in June, M Social Auckland reopens July (both undergoing deep cleaning and odd bit of minor refurb following leaving MIQ pool.
- very strong financial position. Notes a lot of financial stress elsewhere in industry (which may present opportunity for MCK I think being the underlying implication)
- $15k marketing campaign generates $3 million in bookings (!), all advertising budget dedicated to social media.
- the Kingsgate to Copthorne (4-star) conversions achieves a 20% increase in rates, payback time for conversion cost is very short: 2-4 years. Greymouth conversion latest example: Rooms now $150 per night , used to be $105 average as kingsgate.
- much cheaper to upgrade existing hotels than to buy new ones, very capital efficient and great returns on conversion costs.
- Conferences big key to recovery: MCK is preparing & refurbishing its conference focused hotels (Millennium Queenstown, Rotorua, Bay of Islands etc) to be ready for summer conferences. Conference Bookings already growing. in house sales team very experienced with landing domestic & international conferences, has best conference facility in beautiful NZ locations that conference attendees want to go.
CDI: (MCK owns 66% of CDI)
- CDI doing very well, along with Sydney operation is a very good buffer for MCK while Hotel industry recovers. Year to date sales in first 4 months of year at CDI already generated enough gross margin to comfortably cushion any potential slowdown in residential land sales in 2nd half of year if that eventuates.
- CDI move into recurring income assets (commercial warehouses) already generating good returns, also chance in time to sell warehouses once it becomes tax free for sale profits (not intent to sell, but good option to have)
- CDI extended land holdings in Hamilton (124 hectares), now in position to build an “integrated development” - residential, retirement villages & healthcare centre. Same option for the new large Havelock North landholding.
- CDI has enough new landholdings for next decade of CDI land development/sales and continued revenue diversification with further commercial developments.
- Both companies (MCK & CDI) very well positioned for “new opportunities” generated by current industry turmoil. Plenty of cash, zero debt.

(I am going to miss BK’s presentations - I love his style).

I can’t believe there were zero questions!

[clearasmud]

Thanks for that LEK!
How come CDI warehouses become capital gain tax free on sale?

[LaserEyeKiwi]

Thanks for that LEK!
How come CDI warehouses become capital gain tax free on sale?

Not sure the specifics but BK mentioned it a couple of times. Perhaps a certain amount of time where they are not determined to have been assets built with the intention to sell, but rather were long term assets to generate income.

[clearasmud]

That sounds great.

[DarkHorse]

Any current thoughts on this? Does anyone have any clue whether Ozzies are starting to flock to their hotels - or are likely to soon - or whether airbnb type sites continue to take market share... ?