MTR Details

Mantra Group, the leading Australian-based hotel and resort operator, has been performing well with rising demand in travel and tourism sector. The group has been growing well since listing in 2014 and has witnessed a three-year CAGR for underlying EBITDAI at 18.2%. FY17 also has been a strong year with all operating segments on track and performing in line with market guidance. MTR’s portfolio has grown by 6 new properties in the fiscal year 2017 and additional 3 properties since 30 June, namely Mantra Sydney Airport Hotel, FV by Peppers in Brisbane and Mantra MacArthur Hotel, Canberra were added. The group’s acquisition of the Art Series Hotel Group delivered 7 unique CBD hotels into Mantra’s growing portfolio.
 

Performance over the Years (Source: Company Reports) 

Around mid-December, Credit Suisse became a substantial holder with 5.07% interests in MTR.

Taking advantage of the tourism sector trends, MTR has gained a lot of attention with French hotel giant, AccorHotels inking an agreement with Mantra for acquiring all of the issued capital in Mantra by way of a scheme of arrangement while offering AUD3.96 in cash for each Mantra share including any potential special dividend. The offer is $4.02 per share less the final FY17 dividend that has already been paid. Further, the acquisition looks to be over 10% EPS accretive. If approved by regulators, the deal will be finalised by April 2018. As of now, the deal has moved to the next stage for the review by the Australian Competition and Consumer Commission late in November 2017.

It is worth noting that the acquisition move has been based on Mantra’s ability to identify and secure sizeable assets, FY17 performance with 17 acquisitions and better profits, and the trend in tourism sector which may witness a double-digit growth in international visitors over next year.

While there can be some upside potential; considering the current scenario on acquisition and regulatory risks pertaining to combined market share of Accor and MTR with a slightly uncertain market impact and any additional risks around project deferments / cancellations, we put a “Sell” on the stock at the current price of $3.90


MTR Daily Chart (Source: Thomson Reuters)
 

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