Midas Tip18 Dec 2016 19:54
"Unfortunately, there have been some losers among this year’s recommendations, including Elegant Hotels, one of our top tips for 2016. Elegant shares were 115p last January. Today they are 80½p.
The company owns six luxury hotels in Barbados and 70 per cent of sales come from UK customers. In the run-up to the Brexit referendum – and immediately afterwards – consumer confidence wobbled and costly trips to the Caribbean seemed like an expense too far for many holidaymakers. A weak pound made those holidays even pricier and there were even concerns about the Zika virus, although few cases were reported in Barbados.
The group gave two warnings, first admitting that sales would be down for the year to September 2016 and then revealing that revenues would barely change this year either. Predictably, the stock sank.
However, there are some encouraging signs on the horizon, particularly the appearance of serial entrepreneur Luke Johnson on the share register. Johnson bought a 10 per cent stake on October 28 and another 2.5 per cent last week. Johnson is known as an astute investor and he is joined on the register by insurer Legal & General and stockbroker Hargreave Hale, which have been buying stock recently.
The company has also said it will pay a 7p dividend for the year ending September 30, putting the shares on a yield of more than 9 per cent. Reassuringly, the group owns its hotels, which are valued at more than 184p a share.
Midas verdict: Elegant Hotels has had a deeply disappointing year, but there is a new finance director and the growth strategy remains in place. Now is not the time to sell. In fact, today’s low price could even represent a buying opportunity."
Sign In
Follow the stocks
