MCK - Millennium & Copthorne Hotels.

[sb9]

Stock up 6% so far today

At the daily CV press conference just now the air Marshall overseeing the managed isolation facilities Just blurted out that the government has signed 6 month long exclusive contracts with each hotel guaranteeing 100% occupancy. This is huge news for hotels participating (I’m guessing he wasn’t supposed to reveal this detail).

Wow, posts on ST forum does have the power to move and shake stocks , good on ya.

[LaserEyeKiwi]

Wow, posts on ST forum does have the power to move and shake stocks , good on ya.

that would be crazy if true!

Its up 8% now so I assume someone made a big buy.

[traineeinvestor]

that would be crazy if true!

Its up 8% now so I assume someone made a big buy.

23, 887 shares went through today. Not big volume but it shows how thinly traded MCK is.

[LaserEyeKiwi]

A reminder that MCK usually reports 1st half earnings in the first few days of August - so probably Monday Week I’m guessing.

Will be a very interesting call considering since the last update they have had at least a few of their hotels fully 100% booked out by the government for 6 month contracts.

[LaserEyeKiwi]

MCKs two premier Auckland properties (Grand Millennium & M Social) are confirmed to be in the government isolation pool (has been referred to as 100% occupancy minimum 6 month contracts.)

Just these two properties alone account for 642 rooms. Depending on the rate negotiated with government on daily rate for room & food etc, would mean the following revenue for MCK over a 6 month period, just from these 2 hotels alone:

$250 daily rate x 642 rooms x 182 days: $29 million
$300 daily rate x 642 rooms x 182 days: $35 million
$350 daily rate x 642 rooms x 182 days: $41 million

I do not know what the daily rate would be, but it has been stated that the $3000 fee that the national party proposed returnees pay did not cover the entire cost of a 14 day stay, meaning the minimum daily rate is higher than $214 ($3000 divided by 14 Days). It was also mentioned that additional people staying in same room would be charged $1000, and if that also didnt cover the cost entirely, it would imply the daily rate for one room is higher than $285.

[Southern Lad]

It is logical that the Government would be incurring other costs in addition to accommodation and food in running the managed isolation programme including security, rental of temporary security fencing, travel to and from Auckland airport (including domestic charter flights in some cases), and programme administration. Therefore $214 may be spreading far wider than hotel operator.

Although the rates payable to MCK and other hotel operators will be commercially sensitive, surely the Government has negotiated a significantly lower rate than normal average rates achieved for each property given 100% occupancy, no marketing costs or booking commissions, lower front desk staffing requirements, etc.

[LaserEyeKiwi]

It is logical that the Government would be incurring other costs in addition to accommodation and food in running the managed isolation programme including security, rental of temporary security fencing, travel to and from Auckland airport (including domestic charter flights in some cases), and programme administration. Therefore $214 may be spreading far wider than hotel operator.

Although the rates payable to MCK and other hotel operators will be commercially sensitive, surely the Government has negotiated a significantly lower rate than normal average rates achieved for each property given 100% occupancy, no marketing costs or booking commissions, lower front desk staffing requirements, etc.

thanks for the reply! Yes there will be additional costs involved that aren’t going to hotels, but it should be stressed that the $3000 (or $4000 for a couple) proposed still doesn’t cover the entire cost. A lot of the things you mention aren’t that large a cost considering they are spread over a large amount of people (transportation on a bus is spread amongst dozens of people at only a few dollars each, security at a hotel is across hundreds of rooms at ~$5 dollars a day per room) - and the vast bulk of the cost of isolating an individual or couple is the 14 days accommodation and 42 meals per person - all of which is provided by hotels. One other thing is the two tests - which are being done by a government owned lab, no idea how that woud be costed.

[BlackPeter]

HY results are out and they look amazing: https://www.nzx.com/announcements/357053

Who would have thought that MCK is reporting a quite solid half year profit (actually a record profit after tax) this half year after the lockdown? But before shareholders get too excited lets look at the details:

MCK as a group made an unaudited profit before tax and non-controlling interests of $26.26 million for the six month period ended 30 June 2020 (2019: $41.00 million). The main contributor to these results were sales of residential sections from our majority-owned subsidiary CDL Investments New Zealand Limited which traded well in the last six months. In addition, one sale of a sub-penthouse at the Zenith Residences in Sydney which settled during this period has also helped our overall result.

As a result of these property sales and a one-off non-cash tax credit of $20.06 million arising out of the Government’s COVID-19 Business Continuity Package, MCK has recorded a profit after income tax and non-controlling interests of $34.09 million (2019: $23.81 million) The group revenue and other income for this period were $84.74 million (2019: $110.61 million). However, earnings per share for the period increased to 21.55 cents per share (2019: 15.05 cps) reflecting the impact of the tax credit from the COVID-19 Business Continuity Package. This has also impacted on MCK’s Net Tangible Assets per share as at 30 June 2020 which was $4.44 per share (2019: $4.08 per share).

OK, so running the hotels over the last 6 months generated only a quite small profit ($3m) - but still - they made a profit, who would have thought!
CDI (check there) reported as usual a good result, which is obviously good for the majority shareholder (MCK).
The recent change in tax laws (allowing them to write off property again) added the lions share ($20m) to their HY profit of $26m. Unfortunately only a one-off.
Ah yes - and there was this one off property sale in Australia.

Still - quite amazing ... I expected at best a NIL in earnings .. and here they are and delivering the best (after tax) HY result ever!

Outlook is not quite that flash (that's the problem with one-offs, they are one-offs), but still - they do expect to make a (modest) profit for the full year.

No-one should be in any doubt that the outlook ahead for MCK’s New Zealand hotel operations will continue to be grim. The reality for the foreseeable future is lower occupancy, lower margins and minimal profit. We also believe that we have not yet seen the full extent of the economic effects of COVID-19. As economic conditions globally get worse, we expect still further falls in demand for travel and accommodation as people tighten their belts once again. The announcement that the APEC 2021 Leaders Meetings and associated events are to shift to virtual meetings is one indication as to where things are likely to head for our traditional conferencing and meetings business in the immediate term.

While we are aiming to reopen all of our hotels by the end of the year, this should not be taken as a certainty given that we do not know when our borders will be reopened to the rest of the world. Even when New Zealand is able to welcome visitors from overseas, we will be taking a cautious approach to ensure that we do not compromise the health, safety and wellbeing of our staff and guests.

On a positive note, MCK is not just a hotel company. As a “property company with hotel assets” any growth and indeed any profit, for the time being, will come from our property divisions in New Zealand and Australia. While they have not been as badly affected by COVID-19 as our hotel operations, we remain optimistic but cautious that sales will continue as forecast. Should market conditions change, both divisions are agile enough to adjust their operations as needed.

As well as ensuring that our hotel operations survive this difficult period, as a group, MCK is aiming to deliver an overall result that will see a profit, but we caution shareholders to moderate their expectations. To achieve an overall profit in this environment remains a challenge and is also dependent on many factors, several of which are outside our control. We are well aware of the enormity of the task ahead and we are committed to achieving our goal.

Who would have thought ... isn't it amazing to own really solid and conservative companies with solid balance sheets? I like the quiet performers nobody is talking about ...

Discl: very happy holder!

[WAIKEN]

Great analysis Peter
A massive discount for high quality and well placed assets that will continue to appreciate.
Covid19 will become endemic like the other coronaviruses that have been with homo sapiens for thousands of years according to carbon dated human remains. Possibly they have been with us for much longer.
Angela Merkel has stated she expects 40-60% of Germans to have been infected by mid 2021.
Travel will recover. Global health systems will adapt to Covid 19. eg Saliva tests with instant results, antiviral drugs and a vaccine on a par with those for the existing influenza family of viruses.
I am looking forward to increased dividends and an appreciating share price over the next ten years.

[Beagle]

https://www.voanews.com/economy-busi...onger-expected

Might have a nibble after a vaccine has proven to be effective. 100 day moving average line shows downtrend is still intact.
Outlook is sobering stuff. I hope shareholders have heaps of patience. I don't have enough for this one, Beagles can't wait years for a feed, its not in their nature , (best to know, acknowledge and work within your limitations eh)