OEH 3Q09 QUICK REVIEW

For the first time in recent memory OEH's results were in line with consensus estimates.  However, outlook hasn't really changed and the story remains centered on asset value.


 

I suppose when the Street keeps lowering their numbers, companies will eventually meet them.  Street revenues and EBITDA numbers came down 14% and 30% for 3Q09, respectively since last quarter.  We still think the Street is too high for 2010, but again this story is all about asset value.  OEH's outlook basically tells us nothing new:


"While the ongoing decline in demand that has characterized the last two quarters has slowed, I believe it is still too early to predict a return to growth... We will therefore continue with our prudent approach to cash management, including the tight control of costs and capital expenditure, and continue to expedite the sale of non-core assets and developed real estate. Our aim is to significantly deleverage the Company by the end of 2011, with a targeted ratio of debt to EBITDA on a stabilized basis, in the four to five times range."

 

 

OEH VERSUS OUR ESTIMATES:

 

Owned Hotels:

  • Owned revenues of $116.5MM came in $4MM better than our estimate while EBITDA was $1.4MM lower
  • Disappointing results in North America were somewhat offset by better results in Europe
  • Rest of the world was mostly in line with our expectations. Asia results were the least bad, followed by South Africa.

Everything else:

  • Adjusted for Charleston Place, hotel management and JV interest income came in at a $100k loss versus our estimate of $1.3MM
  • Restaurant revenues and EBITDA were $0.4MM and $0.2MM below our estimates, respectively
  • EBITDA from trains was in line with our estimate at $7.7MM
  • Central costs actually increased y-o-y which was a surprise to us

Other things of interest from the release:

  • LOI signed in October for sale of a 3rd non-core asset, with estimated proceeds in the $15-20MM range
    • Our guess is that it's Bora Bora which has been accepting bids since August 2009. For more assets that could be "for sale" see our note "OEH: TRUE VALUE", published 8/12/09
  • Sold 2 villas in Koh Samui for $1.7MM

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