Tuesday, March 1, 2016

Tropical North Qld heating up

'Tropical North Qld heating up' is the title of a stockbroker analyst research report following the half yearly results from Mantra Group (MTR) last week. However there is no actual mention of TNQ anywhere in the report from Macquarie. Perhaps that was a reference to the weather?

What was highlighted in that report was a strong result from the resorts sector where Mantra does have a significant presence in TNQ which makes up a good chunk of the resorts portfolio outside the capitals.

TNQ was specifically referenced in a previous Macquarie research report in January:

MTR area manager for Tropical North Queensland (TNQ) recently commented in the press that occupancy in the 11 hotels under his supervision is up ~5% on last year, and the first quarter is looking 'really positive’. Demand is strong in both the domestic and international markets and MTR is actively looking to add to the domestic and international markets and MTR is actively looking to add to the number of properties in TNQ (source: Cairns Post 30 and 31 Dec). While we don’t have comparable data for the Gold Coast, we also expect it traded well over the holiday season. Recent airport data are also supportive, with Sydney and Brisbane airports reporting December domestic passenger growth of +5.6%, the strongest growth seen for some years.
Yes, this same paragraph of high quality research from Macquarie is not only based on a media report sourced from Nick Dalton at the Cairns Post but repeats the typo error of 5.6% domestic growth posted at BNE for December (now corrected after they were notified). I guess that's why elite research analysts at MacBank get paid the big bucks?

Anyway, the half yearly results presentation direct from Mantra indicates occupancy growth of 4.7% across the resorts portfolio for the period, so it looks like that growth was quite broadly based rather than just specific to TNQ.
Occupancy increased by 4.7% as a result of increased demand for Australian holidays from domestic and international travellers.
Average room rate increased by 9.2% as a result of the increased demand, particularly in Queensland destinations

The combination of those two factors resulted in an increase in RevPAR (revenue per available room) of 14.3% for resorts. In the capital city CBD portfolio results were more mixed: 
RevPAR decreased by 0.6%. This was principally as a result of the reduction in demand in Brisbane, Perth and Darwin which resulted in reduced average room rates. Excluding these regions, occupancy and average room rate increased by 2.0% and 2.9% respectively.

Mantra is a pretty good bellwether for the sector being a pure accommodation play in Australia and New Zealand (plus a couple in Bali) with high tourism exposure along with the transparency and regular reporting of an ASX listing. Mantra brands also include Peppers and Breakfre.

EVT is also an ASX listed entity with exposure to TNQ (Rydges and QT Resorts) but includes substantial cinema operations as well. EVT half year results commentary particularly noted a "difficult trading environment" at Rydges Gladstone and Rydges Townsville.

Note: Intended as general information on the sector and not investment advice. Also Macquarie has a relationship with Mantra including a role in  promoting the 2014 IPO so any positive research from them should consider that context.

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