The Event Hospitality and Entertainment Ltd (ASX: EVT) share price is down 6.5% so far in 2019, making it a good buy for investors.
Background on Event Hospitality
Event Hospitality and Entertainment provides entertainment, hospitality, tourism and leisure services and owns hotels and resorts in Australia, New Zealand, the United Kingdom (UK) and the Middle East. It also operates cinemas and provides technology to externally owned cinemas. Additionally, the group holds rental and other investment properties.
Why it's a buy
Event Hospitality and Entertainment sits on a price-to-earnings (P/E) ratio of 15.44x. This is a significant discount to the ASX 200, which has a P/E ratio of 17.99x at the time of writing. Earnings for the half year ending 31 December 2018 were up by just under 1% and were positively impacted by increased earnings from the group's property investments, along with stronger box office sales.
The group currently has a generous grossed-up dividend yield of 6% – this is sustainable and offers a great return at present interest rates. Dividends paid by the group have increased significantly over the last 10 years and have been maintained at more than 50 cents per share for almost 5 years.
Event hospitality's return on equity (ROE) is solid, with returns above 10% since the 2015 financial year. Given that the company had a payout ratio of 64% in the 2018 financial year, it is also reinvesting some of its profits to compound these returns. Part of the group's ROE is fuelled by one of the group's best performing assets, Thredbo Alpine Resort. This asset posted 10% revenue growth for the half year to December 2018.
When taking a closer look at the group's property portfolio, there is another point that should be raised. According to the company's half-year report in February, these assets are worth 75% more at fair value than they are carried at book value. Additionally, the group are currently divesting underperforming property assets. This should mean higher profits, as better prices are realised for these assets than the prices carried in the company's accounts.
Foolish takeaway
Event Hospitality and Entertainment trades on a low P/E ratio compared to the ASX 200. It has a healthy dividend yield and solid ROE. Additionally, the group are divesting property assets and expect to realise higher prices than those previously reported.
