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Mandarin Oriental International Limited’s Latest Earnings Per Share Surges 49%

Mandarin Oriental International Limited (SGX: M04) continued its recent run of good results, positing a huge 49% increase in its underlying earnings per share. The hotel chain operator, which operates 31 hotels and eight residences across 21 countries and territories, started the first six months of the year strongly. Here are 10 highlights from its interim earnings update:

1. Combined total revenue, which includes the revenue from joint ventures, increased 9% to US$700.2 million from US$644.8 million. Operating profit increased 56.8% to US$35.3 million from US$22.5 million. Together, with share of results from associates and joint ventures, profit attributable to shareholders was 49% higher at US$22.3 million.

2. Underlying earnings per share came in at US$1.77. The group has announced an interim dividend per share of US$0.015 cents, giving a payout ratio of 84.7%.

3. The strong set of numbers was due to generally improved performance across the whole portfolio, but most notably in Hong Kong. However, results were partially impacted by the commencement of restoration of Hotel Ritz in Madrid.

4. Mandarin Oriental Hyde Park in London is also closed after a fire broke out earlier this year. It is expected to re-open in the fourth quarter of this year. The management team has said that it is working with insurers to assess the impact of the fire. It has also reassured investors that the impact on the group’s profitability will be “modest” due to extensive coverage under the insurance arrangement.

5. Late last year, the group said that it will be considering the sale of the Excelsior in Hong Kong. However, it has yet to make a final decision on the asset. The group said it is still considering all options for the site, including the possible redevelopment as a commercial property.

6. The group signed five new management contracts in the first six months of the year. In addition to the hotel in Viña del Mar, Chile, and a residences in Barcelona, which it announced earlier this year, Mandarin Oriental also signed three other new management contracts for a new hotel in Ho Chi Minh City (opening in 2020), and two residences in Muscat and Grand Cayman (both opening in 2021).

7. As of 30 June 2018, Mandarin Oriental had US$529.6 million in debt and US$204.4 million in cash, giving it a net debt position of US$325.2 million. It had a net-debt-to-asset ratio of 16.2%. Net asset value was US$1,255.2 million.

8. Over the six-month period, Mandarin Oriental generated US$59.1 million in cash from its operations. It spent US$37 million on investments and new assets, giving it free cash flow of US$22.1 million.

9. On the outlook, the management said that the positive trend is expected to continue in the second half of 2018. There will be a change of personnel in the group as Stuart Dickie is set to step down as chief financial officer on 31 October 2018 and will be succeeded by Craig Beattie.

10. At the time of writing, shares of Mandarin Oriental exchanged hands at US$2.34 per piece, translating to a price-to-book ratio of 2.4, an annualised price-to-earnings ratio of 66 and an annualised dividend yield of 1.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on Mandarin Oriental International Limited. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.