By:
Clare McNamara, AIM student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Belmond Ltd. (NYSE:BEL) is a luxury hotel and travel operator
headquartered in Bermuda, but has hotels, trains, river cruises, and one
stand-alone restaurant strategically positioned in exotic destinations around
the globe.
• Belmond beats earnings
estimates for FY2015 for the first time in what feels like forever for
investors – and beats again for Q1.
• New management has new ideas
that are just starting to maximize margins and increase earnings – what do they
have to say about it?
• What Belmond is doing on the ground to
implement their new ideas.
• BEL could be heading to new
50-day highs, most recently breaking its 50-day average in a bullish manner.
Key
points: Belmond remains 'in-play’ as H. Roeland Vos, the new CEO, has
not even been with the company for a full year yet and is already making a
major impact on earnings. Vos is an instrumental part of the remodeling of Belmond
and understands the need to put ‘boots on the ground’ research in this
industry. He has already visited every single hotel, train, and river cruise in
the past few months in order to understand each how unique business works
depending on the location. The new COO, Philippe Cassis, has taken the same
stance as Vos and visited the properties in under three months since he was
named COO. This shows how influential of a leader Vos is in fostering a culture
within the company, which will be essential moving forward.
In the most recent earnings
call, Vos indicated that the company has raised guidance for RevPAR growth in
FY2016 to around 3% to 7%. This is because they are not only planning on
aggressive growth strategies for the company, but estimating they will be
implemented within the year as well. These strategies include driving top-line
growth and bottom-line results at existing properties, increasing brand
awareness, and broadening their global footprint. His aggressive strategy has
already begun to work with earnings, beating estimates by 400% for Q4 2015 and
75% for Q1 2016.
Part of this is due to Vos
reorganizing the company’s structure to make it flow better, by breaking down
previously existing silos in revenue management and sales related functions.
Vos has put a lot of trust into Cassis, having all of these functions now
report to him. However, this has proven a successful bet for Vos with RevPAR
already up by 9% over the past quarter due to this, helping them increase the
earnings for that quarter. This is just the beginning of this resource realignment
and will lead to even further expansion of EBITDA margins in the coming year.
On top of all this, BEL is set
to grow top line revenue because of a few different projects they are taking on
at certain locations. They are attempting to increase their capacity without
increasing costs. Some locations have increased their sizes by a few rooms and
suites while others have created completely new suites – for example, they have
moved around employee spaces in order to capitalize on special ocean views for
new suites without having to expand the property.
What
has the stock done lately?
Since Vos took over as CEO in
September 2015, the stock is still down by ~6%. It was trading around $10 in
September 2015 and is almost back at that point. However, it has broke it’s
50-day moving average twice within the past few months in a bullish manner. If
everything goes as planned for BEL, there could be some major momentum in the
stock.
Past
Year Performance: BEL has had a tough year with turnover in two
major management roles. The stock is down ~33% from where it was a year ago.
The changes in management had an especially bad effect on its performance in January
right before earnings, where it reached its trough at $7.68. However, it has
been on the rise since then, with less volatility.
Source: Google Finance
My
Takeaway
Vos has obviously made his
voice heard and it is beginning to echo through the core of the business with
strategies beginning to change. These changes have been fast-tracked and are
already beginning to have a positive effect on earnings, soaring past
expectations the past two quarters. Although the stock is moving in a very
bullish manner recently, I think there is still time to get in this stock and
that the expansion of the company is just beginning – the best is yet to come.
