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Revenue has fallen off a cliff as you would expect (81% down compared to 2019) so really it’s a question of how quickly HSW can get back to business and does it have cash to see it through.
They had €18.2m cash in December but I’m a little concerned that the total admin costs for 2020 was €36.1m and this was after considerable belt tightening.
If Europe opens up in late summer then I’m not too concerned; however, there’s a real risk of this third wave making the summer a write off and then we’re into the next academic year when a lot of young people will be more keen on reuniting with university friends than on travelling.
The company has access to a €30 million term loan facility so I’m not suggesting that they cannot survive. At the same time, I’m not so keen to invest at this time. I’ll sit it out and see how this third wave of the virus plays out.
Hi guys I nothing about this company, but i do own shares in Legal & general who have just raised their stake in HSW from 3 to 4% . LGEN are not idiots, they must see potential to make a return on their investment. I fancy a speculative punt myself because of this, any advise would be appreciated
Sorry, I meant to mention that I have seen that two pro contributors on Seeking Alpha seem to have picked up on Hostelworld, I am not a premium subscriber so cannot access those particular articles there but I'd assume that both are positive. Nice to see the word spreading.
It was interesting in the Easyjet update today that they reported a load factor of 76% on the flights they are running, far higher than I would have imagined them achieving in today's angst-ridden world of travel. That kind of figure would seem to support the thesis of the article just posted, that people, I'd guess particularly younger people, will be itching to get travelling and backpacking again. Locked-up university students perhaps most of all!
Post Lockdown the Millennials and the Zoomers are going to get out and explore – Hostelworld (HSW.L) has 200% upside on a 2 year view.
Post lockdown there will be major demand for the young budget conscious traveller to explore, socialize and interact. By the new year, global youth will have been starved of ‘experiences’ for close to 12 months with significant disruption to their lives and often trapped at home. Pent up demand for a budget hostel and backpacking is significant once lockdowns dissipate. This month, September 2020, Hostelworld released an interesting survey based on a survey of over 3,000 backpackers. The main points a) 52% are ready to travel within 6 months b) 55% expect international travel to be available in 2021 c) 56% of Americans were planning to travel domestically. Given restrictions domestic and short haul has represented 2/3rd of its booking for Americans, British, German and French nationals. However, they need flexibility given the uncertainty and Hostelworld has accommodated with non-refundable but flexible rate.
The company benefited from a capital raise in H1 of 15mn euro and has very little long term debt at 3.5mn euro (but, like a lot of businesses payables have grown to 17mn euro with employer contributions being a big driver). However, these obligations are more than covered versus 33mn euro cash on balance sheet at the end of June. This means the cash on balance sheet remains close to 50% of its market cap. The cash burn in H1 was controlled (thanks to a reversal in working capital and pushing out payables). This will mean the equity value is supported with a high net cash position.
What is Hostelworld worth?
Lets look at revenue multiples as earnings have been decimated. Historically the company has traded around 2 to 3x Revenue (EV/trailing revenue). When the revenue growth rate was higher in 2015 to 2018 the market afforded it a multiple of 4x EV/Revenue.
Analysts expect that by 2022 it will have recovered its 2019 revenue of 80mn euro. We believe the pent up demand to go backpacking will be significant. Let us be conservative and put Hostelworld at 2x trailing revenue for 2022, this would imply an enterprise value 160mn (2x revenue). If we add back net cash of 30mn this points to an implied share price of 1.7 euro versus 0.59 euro currently (note the liquidity is on the UK line, 55 pence).
Hostelworld is an industry leader, with cash on the balance sheet to deal with an extended lock down. We believe the shares offer 200% upside on a 2 year view. The youth will go travelling again and a travel lockdown will not continue indefinitely. Now is the time to start accumulating.
Placing - very poor not making available to retail investors24 Jun '20
This should also be available via Primary Bid as is now becoming common practice. Very poor from the board and the broker not to make this available as an option, looks like treating private investors with contempt and needs to stop as a practice as per all the recent press coverage
To the bottom of the rollercoaster. With not one tangible piece of news since the new director took over in May, what on earth where these clowns expecting ! ...I think I might be the only investor left here, and that’s only because I forgot to sell when I had a chance. Guess I’m going to have to wait for the inevitable buyout.......as I appear to own 100% of the company that shouldn’t be too hard to arrange......