Dalata Hotel Group Hard To Analyse

30 Mar 2015 | 12.40 pm

Dalata Hotel Group Hard To Analyse

Institutions like the scaling story

30 Mar 2015 | 12.40 pm

When hotelier Pat McCann (pictured) passed around the hat in March 2014 to raise €256 million net of costs for Dalata Hotel Group, it was on the promise that he would go out and spend the money to change Dalata from being a hotel management company to a hotel proprietor. In under a year, McCann has fulfilled that objective, after going back for more cash and loading up with debt. And the response form the market so far has been a resounding thumbs up.

Dalata Pat McCann 810Dalata floated at 250c and was bid up to the 345c level recently. The share was at the €3 level in February when the company completed its purchase of nine hotels in the Moran Bewley group. Despite some comment that McCann had overpaid, the shares have been bid up steadily since that deal was announced.

Because of that deal, for the moment Dalata is hard to analyse. The company’s maiden results for 2014 are largely of historic relevance, though an operating profit of €5m on turnover of €79m wasn’t much of an improvement on the pre-IPO trading record.

Dalata Pat McCann 810 2Since the IPO, Dalata completed the purchase of six hotels in Dublin, Derry, Galway, Wexford and Galway. The Moran Bewleys deal gives Dalata a further nine hotels in Ireland and the UK, and in March the company bought the Holiday Inn Hotel in Belfast. The total spend on these hotels was €556m, funded by the IPO proceeds, €49m new cash from shareholders and a term loan of €282m. Now it’s a case of bedding everything down and seeing what happens.

When the Bewleys deal was announced in December 2014, KMPG was charged with coming up with a hypothetical pro forma balance sheet. The net asset value they arrived at was €309m, which even allowing for the recent Belfast purchase is some way below the current market cap of €490m. For the small investor, Dalata is complicated, though institutions obviously like the scaling story.

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