Forum Archive Index - October 2000

[Derek <dkw@paradise.net.nz>]

>Can someone out there advice me on CDL hotels? I was told by a friend that
>is was a very cheap company, so I bought it at 25 cents a year ago. Now CDL
>is trading at 18 cents. In the annual report the company mentioned that the
>NTA is over 61 cents. If the company share price is so cheap why are they
>still dropping? 

Hi Joe,

Many shares are low at the moment, I don't think CDL hotels has been
singled out. The NTA isn't as important as other factors like earnings per
share and cashflow, expected future earnings, general market interest in a
company etc (by the way, some earnings per share are misleading at first
glance for example they may have been achieved by selling off assets etc,
although I don't think CDL are in this category). The NTA is more relevant
if the companies assets are relatively liquid (ie. may make a good takeover
target or may make it easier for a company to change direction), but I
don't know if there are many companies around ready to snap up hotels at
the moment. Personally, I see CDL hotels as a reasonable share to hold for
the long term given the bright outlook for tourism in NZ and their
reasonable p/e ratio.

Derek




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