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Profits Grow 36% at Mandarin Oriental

Mandarin Oriental (SGX: M04) is a global hotel management and investment group. It currently has about 44 hotels in more than 25 countries. The company also invests and develops properties that provide synergy with its hotels.

Mandarin Oriental operates its headquarters out of Hong Kong and it’s part of the Jardine Matheson (SGX: J36) group of companies; other related companies that are part of the Jardine Matheson family include Jardine Strategic Holdings (SGX: J37)Jardine Cycle & Carriage(SGX: C07), Hongkong Land (SGX: H78) and Dairy Farm International Holdings (SGX: D01).

Performance for the year 

Mandarin Oriental had released its full year results for 2013 last Friday and ended the year with revenue of US$669 million, which is 3.1% higher than last year. Hong Kong remains the company’s largest market with revenue of US$246 million. Mandarin Oriental segments its revenue’s geographical origin into Hong Kong, Other Asia, Europe, and The Americas. During the year, the company had experienced revenue growth in all its geographical markets except from Other Asia; one of the major reasons for the drop in revenue was due to the strengthening US dollar.

Mandarin Oriental had been successful in controlling its operating costs during the year as its operating profit grew 14.3% to US$111.8 million. All told, the company’s profits grew 36% to US$96.3 million from US$70.7 million in 2012.

The company’s balance sheet had worsened during the year as its ratio of net debt to shareholders’ funds increased from 14% to 48%. But, that was mainly due to the company taking on more debt to finance the acquisitions it had made during the year, which include the freehold interest in the building housing Mandarin Oriental, Paris and two prime retail units for a total of US$388.9 million.

Future prospects

Mandarin Oriental has about 18 hotels that are under development which will come under long term management contracts upon completion; five of those hotels will be ready within the next 18 months.

The company’s prospects are perhaps best summed up by its chairman Ben Keswick, who commented during the earnings release that “While global market conditions remain uncertain, [Mandarin Oriental] is in a strong competitive and financial position. Over the longer term, Mandarin Oriental will continue to benefit from the strength of its brand, the increasing number of travelers from emerging markets such as China, the limited new supply of luxury hotels in its key mature markets and the phased opening of new hotels under development.”

Foolish Bottom Line

Mandarin Oriental had recommended a final dividend of US$0.05 per share, bringing the full year dividend for 2013 to US$0.07 per share per share, unchanged from the dividends paid out in 2012. Its net asset had also increased by 4% to US$0.99 per share.

With 2013’s earnings per share of 9.61 US cents,  and Mandarin Oriental’s current share price of S$1.70, the company’s trading at a price-earnings ratio of 18 and carries a dividend yield of 4.1%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.