The big news is not continued dividend payments or expansion going to plan. But, the misreporting of the operational hotel rooms.
Before, we begin.
Action Hotels is an owner of branded three to four-star hotels. Since theirestablishment in 2005, it develops partnerships with: –
- Whitbread (owner of Whitbread),
- Intercontinental Hotel,
- And Accor.
It is a subsidiary of Action Group Holding Company (K.S.C.C).
Action Hotels Plan and IPO
The company got listed in late 2013 at 64 pence per share, with net proceeds of £26.4m ($34m). Today, the shares trade at 37 pence.
One interest data point is Action spent $98m before their IPO. That amount translated to 1,000 rooms in services.
But, the company’s main aim is to operate 5,000 rooms by 2020. So, the question on every analyst’s lips: “How is £26m going to get the job done?”
From IPO prospectus, assume $100m gets you 1,000 rooms into operations. Would it cost another $400m to achieve 5,000 rooms?
Since the end of 2016, Action added an extra 1,177 rooms and total debt rose to $228.4m from $108m, an increase of $120.4m. Factor in net proceeds of $34m, it costs Action $154.4m.
How is the expansion coming along?
(P.S. The section below reveal something investors should know!)
Action Hotels – their growth So Far
(N.B.: Results don’t include financial notes. So, some data is from last year.)
We know they plan to operate 5,000 rooms by 2020. Today, it has 2,181 rooms. But the weird thing is the number of rooms stayed the same over the period 2010 and 2012. Were there funding issues? We don’t know.
Warning: – The real issue is the number of hotels reported as operational. Management blamed lower revenue per room (RevPAR) of $61.7 (down from $71) on the big increase in rooms from 1,561 to 2,181.
That is false because management is putting “wools over the investors and shareholders’ eyes”.
Compare 2015’s operational highlights to 2016’s operational highlights, it is night and day!
The 2015’s operational highlights showed 1,928 rooms in operations in 2015.
The 2016’s operational highlights showed 1,561 rooms in operations in 2015.
When you take 2015’s operational numbers, it means the REAL increase is253 rooms, not 619 rooms! That is lower than 2015 (440) and 2014 (484).
Why the discrepancy?
Action Hotels doesn’t want to tell…
