So presumably better to own MCK than CDL? MCK owns 2/3 of CDL and then have the benefit of the hotel operations/asset value.
Own a few of each. ;)
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So presumably better to own MCK than CDL? MCK owns 2/3 of CDL and then have the benefit of the hotel operations/asset value.
Own a few of each. ;)
Hard to say. MCK clearly looks deeper value than CDI, but one never knows if & when the hotels get rid of the "negative hype" factor. Markets don't like the uncertainty around the future of Covid and the ramifications for tourism and does not seem to appreciate the significant real estate component of MCK.
I found it difficult to decide and own both of them for longer than Covid is around - I invested (though not at the same time) roughly the same amount into CDI and MCK and hold now (in value) roughly twice the amount in CDI than in MCK.
One could say now is the time for MCK to shine (and it probably is when tourism returns) ... or alternatively - history might repeat and CDI keeps outperforming its mother ... who knows?
Well in my mind if you currently buy MCK you are effectively getting the Hotel operations for free.
One way or another the Hotel assets will provide a return, with the most likely scenario being that they return to profitability as New Zealand reopens its borders with no/very short isolation periods later this year, and continue to grow back to something approaching somewhere not to far below from their previous pre-pandemic level. That profitability will generate cash that either is distributed to shareholders via larger dividends, or will continue to grow the cash balance on the books. In an absolute worst case scenario where tourism for some reason never returns to New Zealand, the MCK Hotel assets still hold hundreds of millions in value as residential conversions that could be sold, and/or as company owned build-to-rent style residential properties.
A reminder that the hotel segment was generating $25 million in net profits by itself annually before the pandemic started.
MCKs share of CDL net profits was $20.75 million in the just reported year.
Add to that the sell down of the Sydney real estate assets generating ~$5million+ per year for a few more years yet (and continuing to build a large cash balance from the sales), and I think it’s likely that within 18-24 months time Net Income should be back in the $40-$50 million region run rate (assuming hotel operations regain even just 80% of their previous levels).
Profit was $40m this year, but that included a large $15m one off gain of some former hotel land in Christchurch (destroyed a decade ago in the earthquakes). That gain does go to show the underlying value of the hotel assets however. Just the land value of one of its former hotel sites was worth $15m+ alone!
Here is the last 5 years worth of results / net asset status, with the CDL minority-interest value stripped out to show the MCK share of revenue, profits and net assets (note that the 2021 net asset value reflects the new “cost” basis for assets, rather than the previous years which used fair market value).
Also the MCK value of the CDL Revenue/Profit/Net Assets is calculated at current 66.29% level for all the previous years, whereas in those years at the time MCK had slightly smaller ownership in CDL (the last couple of years they took their CDL dividend in shares instead of cash, which has slowly grown their CDL stake slightly larger.
(Edit: this forum doesn’t seem to allow high resolution photos to be uploaded, had to cut the chart in two to make it readable as two separate files)
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Big news just mentioned in the live health briefing: possibility that self isolation requirements for people entering New Zealand may disappear altogether within the month (minister: “expecting to receive advice on that within the next week or two”)
This would be a significant event for the restart of international tourism into NZ.
.....and the end of the government MIQ contracts (or are they locked in until October)? Doesn't sound that attractive to tourists yet though. Would you want to stay in a contaminated hotel? There is still a requirement for self isolation if infected. And you may not get on the plane home if you test positive just before you want to go back,......
SNOOPY
MIQ contracts are non-disclosable by the sounds of it (with the government contract rates & lengths never disclosed to press), with all that MCK has said I that it's two MIQ hotels are "Presently contracted for part of 2022".
MCK only has one owned hotel in the MIQ system (M Social Auckland), with the other being the Millennium Grand (which MCK has a management contract relationship on), so while those two facilities will see less room occupancy (MIQ takes 100% obviously), MCKs other 17 hotels will see higher occupancy rates from the end of MIQ/self-isolation requirements.
MCKs major source of bookings (after Kiwi domestic bookings) is overwhelmingly from Australia, and even just the end of self-isolation for Australian tourists would be a big benefit to MCK.
Isolation free travel into New Zealand is going to be the largest step towards the tourism industry returning to normal. Yes it isn't going to return to pre-pandemic levels overnight - (I am not keen to travel at all for now) - but there are a sizeable fraction of the market still keen to travel, whether to visit friends/family, weddings/funerlas etc - for work, for leisure, etc, and everyone one of those travellers will of course be a boost to the current level of basically zero international tourists.
The last thing to note is that the end of MIQ/self-isolation rules will also lead to a bump in domestic hotel bookings, as it means international music performers, sports teams, conference speakers etc will be free to enter, leading to plenty of kiwis travelling domestically for events.
https://www.stuff.co.nz/national/pol...as-cases-mount
Quote:
Tourism Industry Aotearoa (TIA) spokeswoman Ann-Marie Johnson said it was reassuring to hear the Government was reviewing self-isolation requirements for international arrivals.Having isolation requirements in place meant New Zealand was off the radar for international tourists, she said.
“With the move to phase three of the Omicron response, the rationale for keeping self-isolation rules in place no longer exists,” Johnson said.
TIA was working on an evidence-based case for removing self-isolation requirements and would provide it to the Government as soon as possible, she said.
Decision incoming this afternoon:
Quote:
Cabinet will discuss and make decisions about the future of border restrictions today, Prime Minister Jacinda Ardern says.