Forum Archive Index - June 2001

["Dannie Hawkins" <dannie@es.co.nz>]

Hi

 

Re Mike G    asset backing should be related to assets - liabilities. The questions about CDLs NTA relate to the value of the assets. The market is suggesting that they are overvalued in the books. It may cost say $130,000 to build a hotel room, but if you only make a net profit of say $300 on that room, is the value of the room still $130,000?

To most investors it is the return on their investment that counts.

 

It is worth noting that one of CDLs controlled hotels ,the Millennium hotel in Sydney, was  written down last year by $23.6 million, despite making it's first real trading profit for goodness knows how many years (due to the Olympics)

 

That said I own both CDL and Kingsgate. Kingsgate's shopping centre looks like a real asset. They should have sold their apartments by next year, at a profit, the sales should lower debt and interest costs. I am still very dubious about their hotel though.

 

With CDL I am intrigued by the reported comments at the AGM that the first quarter was good and the trend is continuing (or something like that). If the group can make an extra $10 a room a day it will almost all go on the bottom line. This would make the shares cheap (a PE of about 4) and the book values a little closer to "market value"

 

NZ hotel rooms are very cheap compared to most of the rest of the world. Last year CDL averaged about US$40 a room (not much more than a Youth Hostel in London). There seems to be a bit of room for "international" guests, in particular, to pay more..... If only we had more international business travellers to NZ.

 

Hope this helps

 

Dannie