Check in time is now
After recently scanning the market for heavily sold off companies in 2016 I found what I believe to be a little gem for investors Super Funds.
The company is the Mantra Group (MTR.ASX) which had a shocking run last year and was smashed by over 40%.
Anytime I see an ASX 200 stock that gets hit by that much I always investigate further to find out if there is a structural issue with the company or if it is just a short term blip.
What does Mantra do?
Mantra Group is a leading Australian accommodation operator with the second largest network of hotels, resorts and serviced apartment properties in Australia (by total room number). They have over 20,000 rooms under management for owners in properties across Australia, New Zealand and Indonesia.
Their team consists of 5500 people of whom, 1100 are property management and maintenance staff looking after:
- 10,000 owners
- 125 properties
- 20,000 rooms
- providing more than 2,300,000 guest nights every year
The group operate three High Awareness Brands giving them a strong position in both the corporate and leisure market.
Why has the share price been smashed?
Mantra’s 2016 was a tale of two extremes. The tourism and leisure markets were booming for the company whilst at the same time the cities of Brisbane, Perth and Darwin saw demand for accommodation plunge due to weakness from the mining sector. When the stock traded above $5 the market was pricing in growth that would continue unabated. So the market did not take it too kindly when some lofty expectations were not met.
Can it Bounce Back?
I believe so. This is the type of stock that can easily snap back. Last year, even with those headwinds from the mining sector, the company still managed to make $46 million and are expected to grow that to $54 million in FY17.
We have seen iron ore, coal and copper rally strongly last year so mining activity looks to be on the up and up again. In addition judging by the tourism figures released by the Australian Bureau of Statistics the leisure divisions strength will continue.
The company has minimal debt of approximately $60 million (for a $1billion market cap company this is minimal) and will pay investors a fully franked dividend of around 4.3% or 6% grossed up.