Market Check-up on Mandarin Oriental International Limited: Growth Ahead for Investors?

Last week, Mandarin Oriental International Limited (SGX: M04) completed its fiscal year 2014. Mandarin Oriental is an international hotel investment and management group with properties all over the globe. Its main shareholder, Jardine Strategic Holdings Limited (SGX:J37), holds 73.5% of its ordinary shares, and the associated voting rights.

This is a quick check-up to see if the hotel management outfit may represent a growth opportunity.

By the numbers

Here’s a quick rundown on the financial figures:

  1. Overall revenue for the year 2014 was US$1.39 billion, up 2% compared to last year.
  2. For the year, profit attributable to shareholders did better – up by 4% compared to last year. Profit came in at US$97 million for 2014.
  3. 2014’s earnings per share (EPS) followed suit with a 4% rise from 9.61 US cents in 2013 to 9.67 cents for the year.
  4. For the full year, cash flow from operations came in at US$159.5 million with purchase of tangible assets clocking in at US$29.4 million and a US$16.9 million payment for its hotel expansion in Munich. The lower spending gave the hotel management outfit US$113.2 million in positive free cash flow.
  5. As of 31 December 2014, the group had US$324.3 million in cash and equivalents and US$727.7 billion in borrowings.

As we can see: for 2014, Mandarin Oriental had about the same level of revenue, with slightly higher profits. On the back of the unchanged level of profits, management proposed 7 US cents per share dividend for 2014, unchanged from 2013.

A Peek into Operations

The operations was broadly stable for most geographies, including Asia. While the Hong Kong hotels were impacted by the demonstrations in the city, its hotel in Tokyo benefited from improve visitor arrivals.

Mandarin Oriental also opened two hotels during the year, in Taipei, Taiwan and in Bodrum, Turkey. Management contracts were also secured upcoming hotels in Bali, Manila and Dubai. This comes alongside the expansion of its Munich property, and future renovation for its London property.

Another development was the announcement in October 2014 on its decision to brand & manage 146 Residences at Mandarin Oriental in Bangkok.

On the flipside, the group ceased management of two unbranded hotels in Macau and in Bermuda. A hotel project in Moscow will also no longer proceed.

Foolish summary

In a short snippet, Chairman of Hongkong Land, Ben Keswick added his thoughts on the outlook ahead:

While trading conditions in a number of markets are expected to remain challenging, the Group is in a strong competitive position. Over the longer term, Mandarin Oriental will benefit from the strength of its brand, the increasing number of travellers from emerging markets, particularly mainland China, the limited new supply of luxury hotels in its key mature markets, and the phased opening of new hotels and Residences under development.

Said another way, Mandarin Oriental is looking towards capitalizing on its brand and pipeline of 17 hotels under development for its future growth. For the Foolish investor, our eyes should be on the ability of the company for the long term. With 27 hotels under operation currently, this growth could be a significant step up from current revenue and profit levels.

For Fools who are interested, Mandarin Oriental traded at 18.2 times trailing price to earnings and a dividend yield of about 4%. And if you would like to read more about Mandarin Oriental, hop off to this link here.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.