12th December 2017
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Company Data
 
TPS Eastern Africa Ltd. (Serena)
http://www.serenahotels.com/
Par Value:                  1/-
Closing Price:           30.25
Total Shares Issued:          182174108.00
Market Capitalization:        5,510,766,767
EPS:             0.54
PE:                 56.019
 

TPS manages 15 hotels and resorts across East Africa under the Serena brand name.

H1 Sales 2.621823b vs. 2.656219b -1.295%
H1 Profit before exchange loss, interest, depreciation and taxation 80.251m vs. 180.980m -55.658%
H1 Exchange loss on foreign currency loans [45.703m] vs. [10.569] -332.425%
H1 Net interest cost [70.752m] vs. [54.781m] -29.154%
H1 Depreciation on Property, plant and equipment [194.582m] vs. [189.786m] -2.527%
H1 Loss before income tax [230.786m] vs. [74.156m] -211.217%
H1 Loss after taxation [188.796m] vs. [57.627m] -227.617%
H1 Loss per share attributable to equity holders of the company [1.09] vs. [0.43] -153.488%
Equity 9.411265b vs. 9.571263b -1.672%
Cash and cash equivalents at the end of the period 771.248m vs. 12.647m
No interim dividend

Commentary

During the First half of 2017, the domestic and to some extent the foreign leisure tourism segment in East Africa witnessed a slow but encouraging growth in business levels compared to last year.
satisfactory growth in the corporate segment
current indications for the Kenyan Safari segment look much healthier particularly for Mara and Laikipia.
Kenya coastal region continues to record low materialisation from the foreign leisure market segment as a result of lack of charters and international scheduled flights into Mombasa from source markets
Nairobi Serena has been operating only with 46% of its room inventory ...upgrade program.
given the seasonal nature of the tourism industry in East Africa, the results for H1 2017 are not a basis for forecasting a FY result
Notwithstanding the challenging business environment, Management looks at H2 with much optimism and with our tested and highly successful business model
No interim Dividend

Conclusions

Mombasa is soft, Nairobi is being refurbished [they are spending some cash] and they are looking at a good election.
On a NAV basis its worth much more than the market Cap of $49m
Its a Buy, in fact

FY 2016 Earnings through 31st Dec 2016 versus through Dec 2015
FY Revenues 6.468803b versus 6.189360b +4.514%
FY Earnings before exchange loss, interest depreciation and Taxation 983.64m versus 551.492m +78.35%
Net Interest Expense [172.669m] versus [224.232m]
FY PBT 325.301m versus [210.976m] +254.2%
FY PAT 129.328m versus [280.571m]
FY EPS 0.54 versus [1.63]
FY Dividend 35cents a share

Company Commentary

Tourism sector in East Africa witnessed a slow but positive turnaround during the second half of 2016
traditional and new international source markets performed slightly better than year 2015
increased activity within the EA corporate sector and domestic leisure market segment
experiencing a margin squeeze resulting from overdevelopment around TPSs units

Conclusions

Rebounding with further to go. I expect the rebound to gather strength but the Election is a possible curve ball in FY 17
This is the most optimistic they have been in their commentary for eternity.
I think its a Buy at 23.50


Riding along the Shore Lake Elmentaita @SerenaHotels
http://www.twitpic.com/chc1u0

@Serenahotels Mombasa Indian Ocean
http://www.twitpic.com/23hoxj

Interview with: Mahmud Jan Mohamed, MD @SerenaHotels @YouTube
https://www.youtube.com/watch?v=qXiD7W9lIJ0

H1 Sales 2.656219b vs. 2.671950b -0.589%
H1 Profit before interest, depreciation and taxation 170.411m vs. 182.432m -6.589%
H1 Net interest cost [54.781m] vs. [108.005m] -49.279%
H1 Depreciation on property, plant and equipment [189.786m] vs. [213.881m] -11.266%
H1 Loss before income tax [74.156m] vs. [139.454m] -46.824%
H1 Loss after taxation [57.627m] vs. [97.284m] -40.764%
H1 Loss attributable to equity holders of the company [77.593m] vs. [112.010m] -30.727%
EPS [0.43] vs. [0.61] -29.508%
Currency translation differences [56.461m] vs. [358.713m] -84.260%
Equity 9.571263b vs. 9.956492b -3.869%
Cash and cash equivalents at the end of the period 12.647m vs. [318.273m] +103.974%

Company Commentary

International leisure bookings for the Kenya safari circuit recorded slow recovery during the Fist Half of 2016.
Current indications for the Kenyan safari business segment look much healthier than the past 2 years particularly for the Mara and the Laikipia regions from July 2016
Kenyan coastal region will continue to record low occupancies
Serena Tanzania and Serena Uganda are expected to record satisfactory performance on both leisure and corporate market segments during 2016
Peak Season [July to October 2016] and the rest of the year is expected to be positive
Included in the results for H116 are repairs and maintenance costs that were above 2015 levels various overhauls on northern circuit properties Tanzania
In the course of 2016 Serena commenced refurbishment of Nairobi Serena and extension of Kampala Serena
No Interim Dividend

Conclusions

Substantial improvement Year on Year but the key issue is will the Rebound Trajectory steepen.
I thought the Coast might start to see a Rebound by now given the Travails in some destinations like Egypt, Turkey etc but there appears to be no discernible spill over
This is a good entry level on an 18 month horizon.

FY Sales 6.189360b vs. 6.337210b -2.333%
FY Earnings before exchange loss, interest, depreciation and taxation 551.492m vs. 782.387m -29.512%
FY Unrealised exchange loss on foreign currency loans [121.566m] vs. [17.608m] +590.402%
FYs Net interest expense [224.232m] vs. [154.419m] +45.210%
FY Depreciation on property, plant & equipment [426.566m] vs. [426.237m] +0.077%
FY [Loss] profit before income tax [210.976m] vs. 220.101m -195.854%
FY [Loss] profit after tax [280.613m] vs. 274.419m -202.257%
Attributable to equity holders of the company [296.571m] vs. 245.910m -220.601%
[Loss] earnings per share attributable to the equity holders of the company [1.63] vs. 1.35 -220.741%
Dividend 0.25 vs. 1.35 -84.481%

Company Commentary

The Company navigated through another challenging year for the Tourism Industry in East Africa which negatively impacted performance due to a combination of external factors that were beyond Managements control.
During 2015 Total Arrivals at JKIA and Moi International Airport recorded a drop of approximately 30% and 70% compared to 2012
Tourist Arrivals recorded a drop of approximately 30% in Year 2015 versus 2014
The tourism Industry remains confident that at least the second half of 2016 should witness a reversal of fortunes in the Kenyan Tourism Industry
Safari business segment positive from July 2016
Kenyan Coastal region will continue to record low occupancies although improvement forecasted from November 2016
During Year 2016, Serena Hotels commenced the refurbishment of Nairobi Serena and the extension of Kampala Serena

Conclusions

It was a tough period and TPS is pushing the rebound right out to Q4 2016.

TPS Serena 1st Half Earnings through 30th June 2015 versus through 30th June 2014
H1 Sales 2.671950b versus 2.711993b -1.47%
Profit before Exchange Loss Interest Depreciation and taxation 257.588m versus 335.441m -23.2%
Exchange Loss on Foreign Currency Loans [75.156m] versus [14.530m] +417.2%
Net Interest Cost [108.005m] versus [56.239m] +92.04%
Depreciation on Property Plant and Equipment [213.881m] versus [206.425m]
[Loss] profit before Income Tax [139.454m] versus 58.247m
[Loss] Profit after Taxation [97.284m] versus 41.475m
EPS [0.61] versus 0.13
Currency translation differences [358.713m] versus [70.537m]

Company Commentary

First half of year 2015 proved to be quite challenging
a slowdown in international leisure bookings to Kenya and Tanzania
East African portfolio recored encouraging business levels in the corporate business segment although bookings are at very short lead times
high profile events that are scheduled to take place defining moment underline East Africas increasing importance
The business outlook for the peak season [July to October 2015] is expected to be at satisfactory levels
During 2015 and 2016 begin extension and refurbishment at Nairobi Serena Kampala and Dar Es Salaam Serena

Conclusions

Soft First Half but I am optimistic that H2 will leverage the Potus Visit and increased interest in the region.
H1 might well prove the bottom the Issue is around the Rebound which i expect to be gradual.

Full Year Earnings through 31st December 2014 versus through 31st December 2013
Full Year Sales 6.337210b versus 6.814334b -7.001%
Earnings before Exchange Loss Interest Depreciation and Taxation 782.387m versus 1.250285b -37.42%
Net Interest Expense [154.419m] versus [144.822m]
Depreciation on property, plant and equipment [426.237m] versus [388.246m]
Full Year Profit before income Tax 220.101m versus 451.001m -51.19%
Full Year deferred income tax 109.004m versus [76.909m]
Full Year Profit after Tax 274.419m versus 451.001m -39.15%
Full Year Earnings Per Share 1.35 versus 2.26 -40.265%
Final Dividend 1.35 a share unchanged

Company Commentary

Year 2014 proved to be another challenging year for the Company as the Tourism Industry has been battling to rebound from a series of setbacks since year 2013
The setbacks include elevated travel advisories and other firms of security alerts issued by governments of main source markets, growing threat of terrorism and local security incidents, introduction of VAT on tourism services and park fees in September 2013 which continue to make Kenya uncompetitive relative to other safari destinations.
EBOLA bookings for units in Tanzania witnessed extensive cancellations for period September 2014 to March 2015
Kenyan Coast is experiencing an unprecedented business crisis
Corporate business segments contributed positively
The positive results can be considered satisfactory within the overall context of a business environment that was challenging
In 2015 Serena is expected to begin the extension and refurbishment projects at Nairobi Serena Hotel, Kampala and Dar Es Salaam

Conclusions

These issues have largely been a known known.

See My Interview with Mahmud Jan Mohamed, MD, Serena Hotels @SerenaHotels @YouTube
https://www.youtube.com/watch?v=qXiD7W9lIJ0

Therefore, my view is that this a creditable performance when considered against that backdrop. There is no Silver bullet that I can see that is going to sort out the Tourism Industry anytime soon.

First Half through 30th June 2014 versus 30th June 2013
First Half Sales 2.711993b versus 2.921193b
Profit before exchange loss, interest, depreciation and Taxation 335.441m versus 486.343m
First Half profit before Income Tax 58.247m versus 205.079m
First Half Profit after Tax 41.475m versus 141.077m
H1 Earnings Per Share 0.13 versus 0.69

Company Commentary

a challenging business landscape in Kenya
Serena Tanzania and Serena Uganda recorded good performances during the period under review
Peak Season [July to October 2014] is at satisfactory levels
No Interim Dividend

Conclusions

Those results are better than I in fact expected. Serena is a diversified Franchise sure Coastal Tourism is soft and expected to remain so but there is diversification and the business is worth a great deal more than its current 6.785b valuation.

Sun Rise from the Bed Room @ The Polana @Serenahotels #Maputo
http://www.twitpic.com/9sa9j5

Lake Elmenteita @SerenaHotels #Kenya #Africa
http://www.twitpic.com/chl3gk

The Serena The Star
http://www.rich.co.ke/media/docs/041NSX1106.pdf

MY memories of the Serena start in Mombasa years back when the managing director Mahmoud Jan Mohamed was the manager. I was then a teenager and remember losing my heart to a girl, who would beat me at table tennis, in a bikini. That table tennis Table is still there. The Serena brand has always been sprinkled with a fairy dust and reminds me of happy joyful carefree halcyon days of youth. That brand equity was appreciated last Thursday at the Grosvenor House where The Serena Hotels won the Best Hospitality, Travel and Tourism in Africa award at the African Business Awards.

And now, Serena is clearly staking out a much more forward and offensive position across the region and as you know by now, I sense the Eastern sea board of Africa is at a tipping Point [The oil and gas refers but just as important is the late cycle arrival of the information century which is the entry ticket for Africa to join in the c21st That Arrival of the Information Century is very grass roots because anyone with an Internet enabled mobile phone has an entry ticket and therefore, I see the expansion of the brand as timely and riding a rising tide. The brand is established. Its got breadth, its not a mom and pop operation. Sure, lots of folks are coming for Serena lunch but their longevity, their ability to navigate has been proven and their DNA make them a formidable competitor.

Real Time 1818 #Serena Indian Ocean #Mombasa 1,484 days ago
http://www.twitpic.com/23hoxj

FY Earnings through 31st December 2013 versus 31st December 2012
FY Sales 6.841420b versus 5.343960b +28.021%
FY EBITDA 1.467815b versus 1.164826b +26.011%
FY Net Interest Expense [144.822m] versus [154.561m]
FY Depreciation [388.246m] versus [303.694m] +27.84%
FY Profit before Tax 973.247m versus 721.516m +34.889%
FY Profit After Tax 668.530m versus 493.588m +35.442%
FY EPS 3.45 versus 3.60 -4.1666%
Final Dividend 1.35 a share versus 1.30 +3.846%
Weighted average number of shares 182,174 versus 148.211

Company commentary

faced a challenging business landscape during the first half of 2013
During the last quarter 2013 JKIA Fire incident Westgate Mall and grenade attacks in tourist areas in Mombasa resulted in further anxiety in source markets
Serena Tanzania and Uganda outlook for 2014 is at encouraging levels
Taking all factors into account, the companys performance for the year 2013 is commendable

Conclusions

Commendable results when set against a weak Tourism backdrop. Serena is regionally diversified which brings some insulation from pure Kenya dynamic which have been soft. This is an undervalued share, in my opinion.


H1 Earnings through June 2013 versus June 2012
H1 Sales 2.921193b versus 2.209633b +32.202%
Net Interest Cost [81.482m] versus [63.900m]
H1 PBT 205.079m versus 170.098m +20.565%
H1 PAT 141.077m versus 120.498m +17.078%
EPS 0.69 versus 0.90 -23.333%
Weighted Average number of shares 182.174m versus 148.211m

Company Commentary

a challenging business landscape in Kenya during the first half of year 2013
On a positive note, the peaceful elections helped to further strengthen Kenyas reputation as one of Africas stable democracies and a forecast business outlook for the peak season from July to October 2013 is at healthy levels
The Management therefore remains optimistic that the company will record satisfactory results at the end of the Year.
Company continues to concentrate on the new and emerging markets in line with the Alternative Markets Strategy [Middle East, India, China, Japan and Africa]
No Interim Dividend

Conclusions

TPS has a very strong H2 Skew and therefore the H2 Forecast is supportive.
This is a strong EAC Franchise well positioned to ride the expected Expansion in the EAC.
The Trailing PE of 13.125 has a built in concession now re the increased number of shares.
Good Turnover expansion of +32.202% H1.

FY Earnings through Dec 2012 versus FY Earnings through 2011
FY Sales 5.343960b versus 5.465975b -2.2322%
FY PBT 721.516m versus 853.133m -15.427%
FY PAT 493.588m versus 615.891m -19.857%
FY EPS 3.60 versus 4.51 -20.177%
Final Dividend 1.30 per share [2.4299% Yield]

Company Commentary

Company successfully navigated through a rather challenging business Landscape for the Tourism Industry in East Africa
Company cites Euro Zone Crisis, increased energy and interest Costs, fragile security and political environments, travel advisories and security alerts
Companys Performance for the Year 2012 was salutary

Conclusions

I think TPS SerenaHotels is the most correlated share to the Peaceful Outcome of the recently held General Election.
There is Upside towards 75.00 in the Event Kenya and the EAC accelerates into a New Normal GDP Trajectory which looks increasingly likely.

Swot Analysis H1 2012 versus H1 2011
Sales 2.209633b versus 2.113639b +4.5%
Profit before Exchange Loss Interest and Depreciation 404.516m versus
430.426m -6.00%
Net Interest Cost 63.9m versus 42.412m
Depreciation 173.894m versus 114.089m
Profit Before Tax 170.098m versus 264.709m -35.7%
Profit After Tax 120.498m versus 185.671m -35.1%
EPS 0.90 versus 1.36 -34%

Company Commentary

Given Their Relative Reliance on the Eurozone based Source Markets,
The Tourism Sector in Kenya and Zanzibar encountered various
challenges during the First Quarter 2012.

Company talks about the H2 Skew.

Conclusions

The FY now requires a Muscular H2 Rebound.

TPS Eastern Africa Ltd. (Serena) reports FY 2011 PBT +23.1% Details here
http://j.mp/5Ve4gj
FY 2011 Results versus FY 2010
Turnover 5.5b versus 4.5b +22%
Profit Before Tax 853.133m versus 629.933m +23.1%
Profit After Tax 615.891m versus 516.384m
Earnings per Share 4.51 versus 3.49 [Restated]
Final Dividend 1.30 per Share

Conclusions

Its the Only listed Proxy at the Nairobi Securities Exchange. It looks
squarely priced on a PE of 10.69844

Swot Analysis H1 2011 Results versus H1 2010
Sales 2.113639b versus 1.785452b +18.4%
PBT 264.709m versus 215.621m +22.8%
PAT 185.671m versus 142.178m +30.6%
EPS 1.36 versus 0.96 +42.13% There is a Big 2nd Half Bias
No Interim Dividend

Conclusions

The Group always exhibits a Strong H2 Bias and they are forecasting a
strong Book over that Period

FY 2010 versus FY 2009
Sales 4.462614b versus 3.889365b +14.7%
PAT 516.384m versus 380.362m
EPS 4.39 versus 3.59
Final Dividend 1.25 per share

Conclusions

Note the Commentary which is very cautious.

Its a well managed regional Franchise and the only listed Tourism Counter.
Average Price Over the last 5 Weeks
Average Price Over the last 5 Months
No. Of Shares Traded Over the last 5 Weeks
No. Of Shares Traded Over the last 5 Months
Market Capitalization Over the last 5 Weeks
Market Capitalization Over the last 5 Months
Data Source: Nairobi Stock Exchange
Trading Day: 11 Dec 2017
 
Downloads
 
  17-AUG-2017 ::  Half Year Results
  Unaudited Consolidated Results for the Half Year Ended 30th June 2017.

Download N.S.E Announcement
   
  07-JUL-2017 ::  AGM Resolutions
  Annual General Meeting Resolutions.

Download N.S.E Announcement
   
  27-APR-2017 ::  Full Year Results
  Audited Consolidated Results for the Year Ended 31st December 2016.

Download N.S.E Announcement
   
 
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