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Send  Share  RSS  Twitter  28 Feb 2010

VENTURES: Queensgate's Rating Dribbles Down

 



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WITH the Green Point soccer stadium now part of the city skyline one wonders why the share price of a Cape Town-based luxury hotel operator is looking so weak only months ahead of the expected World Cup influx.

Queensgate Hotels & Leisure arguably operates a portfolio of Cape-based hotels that is best positioned to catch the droves of soccer tourists to the city.

Yet Queensgate’s JSE listed shares have dribbled down from an annual high of 35c in April last year to the current price (at least at the time of going to press) of 4c.

Puzzling since the group’s Raddison Hotel is but a goal kick away from the stadium, and surely will be doing a roaring trade during the World Cup months.

Queensgate also operates numerous other Cape-based hotels – including the Inn on the Square, the Cape Town Hollow, Hollow on the Square, the Avenue Hotel (Fish Hoek) and the Alphen Hotel (Constantia).

Recently Queensgate also took over the operations of the recently finished Shelley Point Hotel and the Rockwell All Suite Hotel in De Waterkant.

The phrase ‘perfectly positioned for the World Cup’ springs to mind. So what gives with the wonky share price?

Queensgate, in the year to end August, notched up a loss of around R3 million despite generating a fairly substantial turnover of over R120 million.

CEO Andrew Hubbard notes the results were impacted by the two new hotel openings. He says these hotels are still incurring losses as a result of low occupancy levels ‘as is normally experienced by new operations’.

Hubbard expects the new operations to improve as they become more established and higher occupancy levels are attained.

He reiterates that despite the global economic downturn, Queensgate is well positioned to benefit from a number of international sporting events to be hosted in SA.

While Hubbard is keeping up a brave face, Queensgate did suffer another set-back on the day before Christmas when the deal that would see Mauritian-based investment company, Dale Capital, taking a strategic stake in the base was called off.

An official notice to shareholders stated that the SA Reserve Bank failed to grant approval for the transaction.

The original deal - worth some R52 million - would have seen Dale buying 345 million Queensgate shares priced at 15c/share.

Dale would have been the second strategic investor in Queensgate after empowerment giant Mvelephanda Holdings bought a major stake in the company in 2008.

One suspects Dale might have been quite relieved to have had the deal canned – especially since the shares of Queensgate have fallen far off the original agreed price of 15c/share.

With the Dale deal off and the Queensgate share price looking anything but convincing does one assume the market is sceptical about the company’s ability to deliver off its enlarged operating platform. In other words, has Queensgate bitten off more than it can chew?

Hopefully Queens-gate’s results to end February this year will show some sort of progress towards realising profits at the newer hotels – a development that might change sentiment for a company that, by rights, should have plenty opportunity to score big profits during in the World Cup.


 
 
 
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