Langton Capital – 2016-02-19 – Daily Wrap: London market, Turkey, Uber, commodity prices & 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:
The London Market (hotels, restaurants, pubs, bars etc.):
• See earlier comments for more detail on our view that London is perhaps past its best (for this cycle at least) and that it may be about to embark on a period of slower (or negative) growth
• M&C has reported figures this morning. It says ‘trading was weaker than last year in London and New York especially in the second half of the year.’
• It repeats ‘during Q4 2015, RevPAR in key cities such as New York, London and Singapore all fell as compared to the previous quarter.’
• M&C says specifically ‘London RevPAR for 2015 fell by 3.4%. Excluding The Chelsea Harbour Hotel which was acquired in March 2014, London RevPAR fell 3.5%.’
• It says that a part of this decline was ‘due to the refurbishment of guestrooms which started at the end of 2014 and was completed in the fourth quarter of 2015.’ But it does say ‘in Q4 2015, London’s RevPAR fell by 5.0%.’
• But does slow trading result from refurbishment closures or are the latter prompted by the former?
• M&C says ‘the Group will commence refurbishment of two of its key London hotels in 2016…it is anticipated that both projects will require removal of rooms from inventory in stages but the hotels will not need to be fully closed during the refurbishment period. ‘
• Overall, we believe that the London hotel cycle has passed its peak. It would not be surprising in the near future to see rates cut in order to bolster already-falling occupancy levels
• New capacity being put on by Travelodge, Premier Inn & Hub (both Whitbread), Tune, the Accor brands and EasyHotel will all do nothing to support rates.
• So is Uber really losing $1bn a year in China?
• And if it is, how long can that go on?
• Perhaps, with hindsight, in China Uber may have bitten off more than it can chew.
• But the path to riches for these Unicorn stocks – start-up, $1bn valuation, IPO, mega-billion capitalisation (but still losses or de-Minimis profits) – is well trod.
• And while there are billions to be made by getting these gambles right, there will doubtless be people willing to spin the wheel.
• It’s OPM, perhaps (other people’s money) but it is what it is.
• All of which suggests that it may not be just the existing market that gets disrupted, it could be the wealth of those backing the new entrant
• TUI and Thomas Cook have commented that bookings to Turkey are down by as much as 40%
• The operators are able (at some modest cost but at great effort) to move capacity to the Western Med and the Canaries.
• Terrorist incidents such as the explosion in Ankara yesterday will do little to prompt a new wave of bookings to Turkey’s resorts.
Random information, hopefully not all of it useless:
• Press comment that Morrison’s may be bid for. Could happen. The idea of allowing 4 to go to 3 is more appealing (or at least less unappealing) to the competition authorities when there are new entrants and ‘smaller’ operators such as Aldi, Lidl, M&S Food and Waitrose all taking share.
• Shaping up to be a rather soggy end to an otherwise buoyant week. UK markets down yesterday when some others were up. Could go either way today but overall the week has been one of substantial recovery.
• Risk off kinda day yesterday with OIGs, MINs and FINs (oil & gas, miners & financials) on the way down & boring stocks on the way up. House builders relatively strong on broker comment.
• Sterling stable. Brexit fears not impacting just at the moment.
• Oil off a shade. Down a buck and a half from its recent bounce to $35.50.
• Again it pays to look at a slightly longer chart. This suggests that oil price is just bumping around the bottom. Could go either way. That’s stating the blooming obvious but it gives plenty of ammunition to both the bulls and the bears.
• Gold price off the top but still threatening to break through the (what-we-are-told-is) important $1260 level.
• Soft commodities. Most weak. Feature of the day, sugar weak, pig prices strong.
We’re so 21st Century, this morning’s Tweets (diff. font size denotes importance):
1. Coca Cola HBC reports full year numbers, says ‘underlying trends in volume growth continued to be strong in Q4’.
a. Coca Cola HBC FY: Says volumes +2.6% on the year, adds ‘established markets returned to growth for the first time in 5yrs’
b. Coca Cola HBC FY: Saw ‘double-digit growth in Nigeria, Romania and Ukraine’. This helped drive volume in EM +2.5%, despite Russia drops.
2. Restaurant Brands International saw Q4 systemwide sales +8.8% at Burger King & +12% at Tim Hortons, taking Q4 profits to $184.5m
3. Ed’s Easy Diner CEO, Ivan Schofield, is to step down after less than 6mth. Former CEO Andrew Guy is to once again run the company
4. Uber is losing in excess of $1bn a year in China as a result of tough competition from the country’s largest taxi app, Didi Kuaidi
5. Rumours that Tesco and a private equity consortium led by Permira are ‘stalking’ Morrison’s’ run in Daily Mail
6. Brewdog UK sales jumped by 130% in 2015 and the group says it now boasts a 112% annual profit growth rate over the past 5yrs
7. Millennium & Copthorne FY: Sales +2.5% at £847m, PBT down 42% at £109m, EPS down 41.5% at 19.9p and dividend down 52.8% at 6.42p
a. M&C FY: Says ‘the main contributor to the reduction of 1.3% in RevPAR was the performance of the Group’s Asian hotels’
b. M&C FY: Says 2016 started slowly. Says ‘in the first 31 days of trading in 2016 Group RevPAR decreased by 5.9%’.
c. M&C FY: Early 2016 trading sees ‘Europe down by 10.1%, the US down by 10.9% and Asia down by 3.6%.’
8. A bomb blast in the Turkish capital Ankara has left 28 dead and more than 60 injured
9. ECB minutes from Jan meeting suggest that downside risks to single currency economy increasing