WINTER VALLEY TOURISM INVESTMENT CO. (Ticker: WIVA)
Source: Ramada
WIVA currently trades OTC since 2018 (over the counter for the newbies) because the company has been naughty. WIVA owns and operates the 4 star hotel brand Ramada in the Dead Sea area.
(As of 01/07/21)
Share price: 0.5
Market Capitalisation: 4.5 million JODs
Equity ratio: 59%
Revenue in 2021: 1.038 million JODs
Profit/Loss: -1.5 million JODs
Revenue drop due to COVID: -69%
Revenue/Share price: 3
Major shareholders: Abu Shanab 68%
Other information: The company has been on a continuous losing streak since 2015.
AL-DAWLIYAH FOR HOTELS & MALLS (Ticker: MALL)
Source: Marriott
MALL owns and operates the Sheraton hotel on 5th circle which started in 2001.
Share price: 0.48
Market Capitalisation: 20.7 million JODs
Equity ratio: 83%
Revenue in 2021: 3.64 million JODs
Profit/Loss: -3.38 million JODs
Revenue drop due to COVID: -67%
Revenue/Share price: 5.7
Major shareholders: AIHO/Muasher Family/Ahli bank and related companies 50%, Social Security Corporation 12%
Other information: received a loan of 2.5 million JODs for a period of 8 years from the central bank for a rolling interest of 3%. 37% drop in solar power generation revenue. Same as its mother company, MALL has loans to AHLI bank.
JORDAN PROJECTS FOR TOURISM DEVELOPMENT (Ticker: JPTD)
It will not be fair to summarise this company or give it a brief profile/snapshot in this newsletter. A whole section will be dedicated to it in a later when talking about investments in Aqaba as this project (like the current Marsa Zayed, Saraya and Ayla) was first of His Majesty’s dreams come true (and like everything in this country, mismanagement always seems to takes over). Let’s hope all of Aqaba’s dreams come true (medical city, sports city, film city, railway city etc.) and one I personally hoped for was Rubicon’s Star Trek hotel . (Rubicon is another story on its own)
To the newcomer, the hotel sector looks like every other hotel sector in the world. It took a hit and is on the path to slow but sure recovery.
Looking at individual balance sheets of the hotels, you can see that they have high equity ratios >50% (even compared to international standards, for e.g. Marriott was trading at negative equity during its announced merger with Starwood back in 2015); but these high equity ratios are explained by having a large portion of the balance sheet in real estate/property of the hotel (depreciating at 2% per annum).
Looking at income levels during the pandemic, it has made a lot of these hotels practically cheap when looking at Price/Sales ratio averaging 3 - 8 (except for the Four Seasons). Despite having closed the international border as of March 2020 and losing their international clientele, hotels hoped that they would recoup their losses with the locals (who would’ve spent it abroad anyways), the local foreign expat community and the incoming passengers who were forced to quarantine in hotels until September of 2020. However they missed a crucial aspect: F&B/events.
The Food & Beverage usually reflects 25-50% of hotel revenue. This is mainly due from special events such as weddings held in “halls” in the hotel. However the wedding industry per se was completely shut down per government defense law order until the 1st of July 2021. In a separate newsletter, we will compare the results of these 9 companies from the first half of 2020 and the first half of 2021 and see if there are any real signs of improvement. We will also investigate how the drop in revenue (average -70%) matches exactly the drop in the number of arrivals (-70%) despite the hotels receiving quarantine guests and local guests. But that is for another time.
So do any of the hotels look compelling to new investors?
This would depend on two main issues:
1- What will happen to the pandemic and how it will develop during the Winter of 2021 - will we witness another wave of closures and shutdowns despite mass forced vaccinations? If yes, can the hotels withstand another hit in their balance sheets? If yes, will the hotels take such an opportunity to revamp their facilities as some others have tried to do? Or will tourism change completely as COVID turns from a pandemic to an endemic?
2- Since a lot of the hotels are owned by “family” banks/related parties, will this pose a problem to a small time investor willing to buck the trend in a recovering economy?
In the next newsletter, we shall tackle the printing press, viz. Al Rai newspaper and its impeding collapse.
NB: it wasn’t easy to add a diagram, stock graph and table sheet comparing all the data using Airtable. Will try for the H1/20-21 comparison. If the newsletter seems bugged, apologies for this.