Investment bank Jefferies has given Dalata Hotel Group's stock as a "buy" rating due to Dalata trading on the market at a 45% discount of the net value of its property.
Jefferies stated that investors are not appreciating Dalata's strong balance sheet and UK growth prospects.
According to The Irish Times, in a report on the European hotels markets that was published on Thursday June 25, Jefferies said, "We like Dalata's structured business model and think the company is well-positioned to grow in the UK and take advantage of the gap in the three- to four-star hotel market.
"We believe Dalata is likely to gain market share from the independent hoteliers [weaker balance sheets] as trading becomes more challenging."
Jefferies noted that the UK currently accounts for 80% of Dalata's development pipeline and said that the group's valuation is supported by its strong base of 29 group-owned hotels, which primarily operate under the Clayton and Maldron brands and have a net asset value of €1.1 billion. Dalata shares are trading at a 45% discount of that value, the investment bank stated.
Dalata also has a leasehold interest in 10 other hotels and manages an additional three.
Cash, Liquidity Stock Price Target And COVID-19 Crisis Impact
Jefferies estimates that Dalata has enough cash to allow it endure 14 months of lockdown if it had to and said that the group could tap even more liquidity from further hotel sales and leasebacks.
The investment bank's €4.50 price target on Dalata's stock points to over 55% upside from current trading levels.
However, Jeffries predicted that Dalata will experience an €82 million pre-tax loss this year due to the COVID-19 crisis. This compares to an €89.7 million profit in 2019.
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