Langton Capital – 2015-10-29 – Daily Wrap: Low hanging fruit, F East hotels & other:
Leisure Wrap & Other:
So the trading day is grinding to a close. We’re another day older but are we any wiser? After a day of intensive head-scratching, pen flipping and gossip, we have been considering the following. As always, contact us if you’d like further details:
Low hanging fruit:
• Spirit showed that ‘superior’ returns can be generated when capital is focused on unloved or hitherto ignored assets.
• It would appear that Intertain is finding the same thing.
• Better Capital is putting more money into the business but it will be some time before it is clear whether the returns that can be earned on £3m can also be earned on £33m.
• Clue; they can’t.
The Far East, hotels, Emerging Markets, packaged goods (incl. drink) etc.:
• Millennium & Copthorne hotels, down 3% today on Q3 update, has said that Far Eastern markets have not been good.
• It singles out developed markets in Singapore, South Korea and Taiwan as tough and, allied with comments from various beer, spirits and food companies, it would appear as though the region is slowing.
• That’s not new news per se but, when it begins to come through in the numbers for these companies, it’s somehow more real.
• The above is a word now, it’s not even underlined in red.
• Mr Bubb this morning tells us that ‘Marks & Spencer was forced to suspend its website for three hours on Tuesday night after customers complained that they saw other people’s contact details when they logged in.’
• This may be a small issue but, in the minds of the general public (and following Talk Talk etc.) there is a problem with the proportionality of the response.
• Because customers, be they pub-goers or sock-buyers, don’t want their details blasting around left and right.
• And for good reason because, if they leave their name, address + postcode with a retailer & have their DoB on Facebook, they can be cloned & sold off in Eastern Europe pretty easily.
US interest rate intentions.
• The game of show and tell goes on with the Fed now seemingly inclined to raise rates in December.
• This had the predictable effect on equity markets, spot interest rates and currency rates worldwide.
• After a bounce, oil gave back some ground and the US$ rose.
• Commodity prices (including oil) fell a little on the anticipated ‘slowdown’ that would be caused by higher rates but, in non-US$ terms, this was negligible given the US$’s strength.
• Betting now (and there’s a feeling of déjà vu here) is on a December rise in the US followed possibly by and end-of-Q1 rise in the UK.
• Market a little juvenile. Bad news is good & v.v. Also travel companies’ shares reacting without much thought to short term movements in the oil price.
Random information, hopefully not all of it useless (re most leisure operators etc.):
• Craft beer has legs. Technomic reports that craft beer sales are registering a double-digit sales gain in the US for the 5th year running. Volumes were +14% in 2014 and, on the basis that this is a trend that has moved from west to east across the Atlantic, we may well see further growth our side of the pond.
• Soybean (a.k.a. soya beans in Europe) prices down again. It’s an important input in many other foodstuffs, not least cattle. Wiki has it as ‘fat-free (defatted) soybean meal is a significant and cheap source of protein for animal feeds and many packaged meals; soy vegetable oil is another product of processing the soybean crop. For example, soybean products such as textured vegetable protein are ingredients in many meat and dairy analogues. Soybeans produce significantly more protein per acre than most other uses of land.’ The oil ‘is used in many industrial applications.’
• Sugar prices, also an important ingredient, are well off the bottom:
• Risk off day on the markets yesterday with OIGs & miners falling & pharmaceuticals, gold shares, domestics & tobaccos rising. Some engineering stocks have had a sustained poor run.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. BK + Tim Horton’s owner Restaurant Brands net income swung to $182.9m from a loss of $23.5m for its third quarte
2. Leon has secured £11.5m from HSBC to help fund its expansion plans and restructure its existing debt.
3. Intertain are opening up a 600 capacity Walkabout in the former Henry J Beans site at the Printworks in Manchester.
4. BrewDog has launched its second ‘Born To Die’ IPA, available at its bars from Friday 30 October.
5. Millennium + Copthorne Q3. Revenues for Q3 down £6m (down 2.8%) + for 9mths up £18m (plus 3%).
a. MLC Q3: REVPAR in Q3 down 0.1%, PBT £36m (down 28%), EPS 7.3p (down 33%). Asian hotels’ REVPAR down9.6%
b. MLC Q3: Says stronger sterling impacted translation. Says drop in profits ‘mainly due to adverse trading conditions in Asian markets’.
6. Hyatt Hotels is in talks to buy Starwood Hotels in a deal that would create one of the largest lodging chains in the world.
7. Marriott Q3. EPS +20% at 78c, worldwide REVPAR +4.2% in Q3. N America REVPAR also +4.2%
a. Marriott adds 10k rooms in Q3 including 3.8k outside US. Pipeline now 260k rooms
8. Dublin-based online hostel booking platform Hostelworld will raise £125m in its IPO on the UK and Irish stock exchanges.
9. Playtech Q3: Reports total revenue of €170.pm v €116.5m last year. Is +24% excluding acquisitions
a. Playtech Q3: Sees 17% growth in constant currencies, aided by weak Euro on translation. Regulated revenues now >50% of total
b. Playtech on current trading, says first 27dys of Q4 saw daily gaming revenues +14% on last year (+10% in constant currencies).
10. Fed has voted to keep US interest rates unchanged at record lows of 0% to 0.25%, says US economy still expanding at moderate pace
11. Oil price up over last 24hrs, breached $49 at one stage. Now trading around $48.80 per barrel of Brent crude