Although the Mantra Group Ltd (ASX: MTR) share price started strongly and opened around 2% higher, in morning trade it has sunk 8% lower following the release of its half-year result.
Highlights from the result include:
- Total revenue of $356.2 million, up 15.9% on the first-half of FY 2016.
- Underlying net profit after tax up 15.1% to $31.8 million.
- Earnings per share of 10.3 cents per share, up 14.2%.
- Fully franked interim dividend of 5 cents per share, payable on 22 March 2017
- Reaffirmed full-year net profit after tax guidance of between $48.5 million and $52.5 million.
Mantra's Resorts segment was the standout performer during the half. It posted a 30.1% increase in revenue to $163 million thanks to a combination of organic and new resort growth.
Although its struggling CBD segment returned to revenue growth, the 3.4% increase to $162.8 million was largely down to the addition of two new CBD properties.
But disappointingly EBITDAI in the CBD segment fell 5.1% despite the rise in revenue. Management has blamed the decline of challenging business conditions in CBD locations in Perth, Brisbane, and Darwin.
Despite the challenging conditions Mantra still managed to post an increase in occupancy levels and average room rate across the entire business. Occupancy levels increased 2.9% to 82.2% and the average room rate rose 3% to $176.33.
For the full-year management has reaffirmed its net profit after tax guidance of between $48.5 million and $52.5 million. This represents growth of between 12.7% and 19.9% on FY 2016's net profit after tax of $43.8 million.
Should you invest?
Whilst the continued poor performance of its CBD portfolio is a big disappointment, I am pleased to see the rest of the business performing strongly.
Over the next 12 months I expect the CBD portfolio's performance will improve, leading to stronger levels of profitability.
This should complement the impressive growth of the rest of the business, which I believe will only get stronger as the tourism boom continues to flourish.
I would suggest investors seize on Mantra's share price weakness today. Its cheap price, the tailwinds of the tourism boom, and its generous fully franked dividend could make it a great buy and hold investment like Event Hospitality and Entertainment (ASX: EVT), in my opinion.
