Treasure Beach Hotel is part of the Elegant Group. (GP)
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Barbados-based Elegant Hotels Group (EHG) is a good buy for stock market investors in the United Kingdom (UK).
That’s according to analyst Thomas Carr in a recent assessment published by the UK arm of international Multi-media financial services company The Motley Fool.
Carr said in the current economic climate, “it’s especially important that investors don’t overpay for stocks” and mentioned EGH as a company with stock that is “unusually cheap”.
The hotel group is listed on the London Stock Exchange where its shares are traded.
“The shares trade on a [price to earnings ratio] of around seven times last year’s earnings. Not only do I think this is cheap, but it also fails to reflect the future benefit from the reduced corporate tax rate, not to mention a hefty five per cent dividend,” Carr said.
“But the real value comes from the company’s discount to its net asset value. The reported net asset value of £101 million is over 60 per cent greater than the market capitalisation implied by the current share price. Interestingly, the directors even believe that the real value of the group’s assets is in excess of that reported on the balance sheet.”
The analyst noted that while the company’s revenue “has remained flat since the . . . [initial public offering] in 2015, operating profits have risen 58 per cent to $14.1 million last year”.
“In the first half of this year, after-tax profits were up by a whopping 34 per cent from the same period in 2018. Compellingly, the corporation tax rate in Barbados has been reduced from 30 per cent to between just one per cent and 5.5 per cent,” he said.
“The group is committed to leveraging the strength of the brand to both increase sales and achieve savings. With 70 per cent of bookings coming through tour operators, and less than 20 per cent of customers coming from the USA, there is scope to improve direct to customer selling and to focus more on the US market.” (SC)