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I like the hostel space a lot as it provides a cheap alternative to expensive hotels. I'm a LTH here...
http://tinyurl.com/jgffzuc Philip Houghton, chief executive of Hostel operator Safestay PLC (LON:SSTY), tells Proactive that the company needs to “grow more aggressively” to keep up with the significant demand for its hostels. The company has two hostels in London, where only 4% of the hotels in the city are classed as hostels. “That’s a gross undersupply” Houghton says, adding that “we know there is far more demand than the current hostels can meet, and that’s reflected with the fact we are trading really strongly”.
positive outlook was mentioned in the 'no pain no gain' column portefolio of the independent
This share is set to GROW!
Interesting!!
Good analysis and I think you are spot on with regards to the company's future being dependent on a stable Europe. Concerning loans and liabilities, some research into SSTY's cash flow would be needed to see whether liquidity is a potential issue but the nature of the business should mean it has a steady flow of capital. As of today they have just acquired a lease for a new hostel in west London which looks to be in yet another strong location. N.B. I did not buy any stock in the end but continued to keep my eye on it.
The thing is even despite number being higher than forecast they still only turned £107k profit after tax. This should be up in future years now that they have a second hostel open but that's assuming the economic 'recovery' continues and demand for domestic holidays remains high. With the ECB likely to introduce QE, devaluing the Euro, it will mean cheaper holidays abroad. Any financial or trading difficulties could send this company spiraling into the abyss. Assets are £14m but loans and liabilities are huge also compared to gross profits. Expect this to continue falling into 2015. Growth in 2016 is expected to be better but the wider economic factors will have a major impact. Why invest now?
I thought I'd share my personal perspective on this. I actually lived by the London hostel for a year and (given the area - it's a little rough!) was amazed at how good it looked and how many people, and coaches, would come and go. It certainly seemed to be doing a roaring trade! This was in 2013; I have since moved. I happened across this stock and was pleasantly surprise - I'd never thought it would go public but I'm glad it has! After a bit of research, I saw they opened a hostel in York - my hometown! I recently checked the new hostel and it was full of customers and looking good. They certainly have superb property. Also, being familiar with both areas, these guys clearly understand the property market as both were in highly central positions with great transport connections and close proximity to tourist attractions. All in all - I'll be going long on this one.
Thanks for sharing your research, hostelbookers features safestay: http://www.hostelbookers.com/property/prp/51519/arr/2014-05-24/ngt/2/ppl/1/ reduced to £28
Hi Doze, The target market for this is not as you mention. BTW Elephant and Castle is surprisingly central and close to Westminster/Central London sites.This is a top end, stylish hostel proposition for: Traditional backpackers/flashpackers (see definition http://www.hostelbookers.com/article/travel-articles/flashpacking/ ). Tours/schools and youth groups. Younger couples/families. It is also good for business travellers - budget travel is showing the highest rates of growth in corporate travel. http://www.hotelnewsnow.com/Article/10107/UK-hotel-budget-sector-strengthens-share
Sorry, I see you have invested Fundfemale. I think it should be a good investment if bedroom tax people get their rooms at safestay paid by the Council and private rents stay so high.
Perhaps you should divulge if you are invested first, I am. Revisited the website after noticing the IPO the other day and bought in this week. Government policies should drive up occupancy, not so LOL.
Dear Pommefrite, How lovely to see you here, are you invested? The information in the admissions document is up to date (see page 11 for this info). http://www.safestay.co.uk/files/4213/9885/6384/safestayplc-admission-document.pdf The occupancy was 72% last year and bookings are "significantly ahead" for 2014. LY Turnover 1.9million £4750 per available bed. Operating profit in 2013 £494,000 margin 26% Roll the beds out PDQ I reckon!!
does anyone know what this is running at? pomme
A very interesting proposition here. I have viewed the property and I have subsequently invested. Believe the press coverage, it is undoubtedly welcoming and very well operated (front and back of house). All the essential detail is in the admission document, but for me there are a number of very attractive key investment points here: Firstly the investment is completely asset backed by the property itself Grade 11 Listed Building (former labour party headquarters) , bought for £3.8m in 2011 4.5 million spent on conversion to a 74 rooms/413 beds hostel (which range from 2 bed private rooms to 8 bed dormitories). Post conversion and 2nd year operating as a hostel the independent market valuation is 12 is £12,200,000. See admissions document page 23: http://www.safestay.co.uk/files/4213/9885/6384/safestayplc-admission-document.pdf This, on its own, makes a very compelling proposition vs the current market cap (calculation below): Current in issue: Shares issued from 4.8 million placing 9,600,000 Number of shares to be issued to Safeland shareholders 3,617,246 Total shares in issue 13,217,246 Market cap 13217246 x 0.61 (mid price today) 8,062,520 GBP Prior to looking at this investment, I had not realised the key definition of a hostel vs a hotel- which essentially involves the sale of beds vs rooms. A few quick calculations would reveal that the income generated from 413 beds at low hostel rates is higher than a typical budget hotel selling 74 rooms.The positioning is dormitory style accommodation of better quality than that of traditional hostels and at more attractive rates than budget hotels. In addition to traditional hotel clients, in recession recovery , travel budgets, even business ones, are likely to remain under pressure and the budget hotel space remains the highest projected growth sector for the near future. The independent valuation also notes that the most likely aquirer would be another owner/operator. However, as I understand it, Safestay are ambitious and looking to roll out the brand to further locations in London and possibly key destinations overseas. Year end to 31/12/2013 Turnover 1,933,813 Hostel Operating Profit 549,912 28.4% A dividend would be possible from this kind of return, however, I understand the main objective is seeking to achieve capital growth for Shareholders. There is very strong list of shareholders institutional and otherwise at IPO , so these are likely to be very tightly held. Future funding secured. I am taking great interest here, value catalysts are multiple – most significantly roll out of a proven, market friendly, successful product (a quick google will show the press has been fabulous ), property appreciation, dividend potential...
Set in a a gorgeous 18th Century House: http://www.visitbritain.com/en/Accommodation/Budget-accommodation/Britains-best-luxury-hostels.htm Grazia: http://www.safestay.co.uk/files/7513/8010/0548/Grazia.pdf Telegraph: http://www.safestay.co.uk/en/pr-media/what-the-press-are-saying/telegraph-four-of-the-best/ Travel market trends for 2014: http://www.dailymail.co.uk/travel/article-2526585/Travel-trends-2014-The-hottest-holiday-destinations-year-ahead.html
very very interestin
and bought in at 53p http://www.stockopedia.com/content/small-cap-value-report-2-may-2014-goal-sdm-ssty-umtp-rhl-83098/