At just 152p and yielding a very handsome 8%, this unique company’s shares are a decent ‘tuckaway stock’ to add to when prices fall back, argues Mark Watson-Mitchell.
I wished that my children, when they were teenagers and into their early twenties, had taken advantage of their ability to travel around the world, to visit various continents and get a taste of how others live within their own environments. Probably the lack of parental pressure to chivvy them on to do just that was to blame.
However, if a world-wide online hostel-booking platform was available, like the one the Hostelworld Group (LON:HSW) operates, then matters would certainly have been somewhat different.
| Master Investor Magazine
Never miss an issue of Master Investor Magazine – sign-up now for free! |
Set up in 1999, today the Dublin-based company is a leading global player offering internet booking and information for hostels, B&B guest houses, hotels and other accommodation.
Apart from Dublin, the company has offices around the world, in London, Porto, Sydney and Shanghai. It has three main domains through which it offers its services – Hostelworld.com, Hostelbookers.com and Hostels.com. It is the only online travel agent dedicated to hostels.
Using both mobile and desktop apps, which operate in some 19 different languages, Hostelworld travellers have access to a mine of tips and information to aid in their trips. It offers more than 12m reviews across 17,400 hostel properties in more than 178 countries. With such data to hand it is understandable why the brand is considered to be the leading online hub for the younger, intrepid and independent social travellers.
It is reckoned that over 60% of the company’s travellers are solo travellers, so meeting people in various countries is made that much easier for them if they use the company’s mobile app, of which over 45% do whilst travelling. Some 54% of bookings are made from mobile devices, with 56% of travellers using the app for visiting restaurants or venues.
In the latest report from the company, its half-timers to end June, issued in the middle of last week, it stated that it was hit by a double whammy of a 5% drop in gross online bookings to 3.75m and revenue decreased 9% to €38.8m. Even so it was still investing heavily in improving its product offering for both travellers and accommodation owners.
However, the average booking value increased 6% to €12.84, which was boosted by an improvement in its average commission rate to 16% from 15.3% previously.
That report, which predicted a full-year decline for the current year, brought about a swift decline in its share price. However, the company considers that operational and strategic improvements that were put in place in the first half should enable it to return to volume growth during 2020. It is also looking at other opportunities, both organic and by acquisition, to help accelerate the company’s growth.
The company announced a strategic investment in Tipi, an Australian technology company offering a ‘new way of renting’ and allowing guests to check in with a digital key, which Hostelworld considers will enhance its product offering for both its traveller customers and its hostel partners.
After the interims were released, City analysts following the company revisited their estimates for the current year – with brokers Numis now going for €16.6m, giving earnings of 15c. They now suggest that €16.7m and 15.1c are possible for next year.
The company has 95,570,778 shares in issue, valuing it at around £145m. Some 60% of the equity is held by institutions including Standard Life, Unicorn Asset, Baillie Gifford, Miton Group, Majedie Asset, Allianz Global, Capital Group, and Legal & General.
On the face of it, readers may assume that this company is just treading water and that its shares may well do similar. However, I consider that the company, which has over €25m in cash in its balance sheet, is very well based and capable of regaining any market share lost over the last year.
At just 152p and yielding a very handsome 8%, this unique company’s shares are a decent ‘tuckaway stock’ to add to when prices fall back. I see them hitting 200p before the end of next year.