Elegant Hotels Group plc, which is based in Barbados in the Caribbean, operates five upscale, beach front, freehold hotels and a freehold restaurant. Four of the five hotels and the restaurant are located on the Platinum west coast of Barbados with one of the properties located on the south of the island. The group's portfolio comprises 483 rooms which represent almost 25% of Barbados's quality leisure tourist room stock. The Elegant portfolio consists of Colony club, Tamarind, The House, Crystal Cove, Turtle Beach and Daphne's restaurant. The portfolio has recently been independently valued at a fair value of $235.5 million.* The management team has been in place since 2010 and the board of directors of EHG will be chaired by non-executive director Simon Sherwood and Sunil Chatrani will be Chief Executive Officer. Nick Basing and Steve Baldwin, who have recently joined the Board, will be independent non-executives. The Board of EHG aims to deliver returns to Shareholders by growing the business both organically and by expansion through acquisition and joint ventures with other operators and entry into management contracts, in each case both domestically and in the wider Caribbean. It is also the intention to provide returns to Shareholders through the payment of dividends.


Elegant Hotels Group plc

("Elegant Hotels", the "Company" and, together with its subsidiaries the "Group")

26th May 2015

First day of dealings on AIM




http://www.eleganthotels.com/

ST of IC today -On a bid-offer spread of 105p to 108p, valuing the equity currently at £96m, I rate the shares a buy and have a fair valuation of between 130p to 135p. Buy.

ST of IC - I feel my 105p target price is a solid objective and is likely to prove conservative if the company hits those 2018 forecasts.

Canaccord comment today:
"Elegant Hotels plans to be a consolidator in the Caribbean luxury hotel sector. We believe there is a real opportunity for Elegant Hotels to take market share with its branded offer in a region where ownership tends to be fragmented. It has capable management and execution is good; however, mostly due to Brexit, its balance sheet is no longer in the best shape and this is hampering its prospects at a time when it should be accelerating its growth. We believe Elegant Hotels needs to refinance its debt where it can, cut the dividend to a more sensible level and get back on the acquisition trail. It can be difficult for a company to cut its dividend because of how this action can be interpreted, but an 8% yield suggests a cut has been factored in by the market. Indeed, a 'reboot' should act as a positive catalyst to close the gap to our target price.
Elegant Hotels trades on easily the lowest multiples of our peer group. We believe that the current share price fails to take into account: (1) the underlying asset valuation underpinning the group; we calculate that Elegant Hotels is trading at a c.50% discount to adjusted NAV/share of US$2.41/185p using current valuations; (2) the possibility of a bid from a rival hotel operator (Elegant Resorts possibly), private equity or property developer attracted to the NAV discount; or (3) the opportunity to ‘reboot’ the balance sheet to allow the company to return to the acquisition trail. Our 110p target price is based on a 13x PE, 10.0x EV/EBITDA, a 10% FCF yield for FY18E and a 40% discount to adjusted NAV (arguably too much).