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Investors should check in to budget chain EasyHotel

Published: 12:10 29 Nov 2016 GMT

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Investec took a look at the hotel group and liked what it sees

Investec reckons traders should check-in to budget firm EasyHotel plc (LON:EZH) as it continues to increase room numbers and its 2016 results beat the broker's expectations.

It repeated its  'buy' rating on the shares and targets 135p.

"The last 12 months have been transformative for the group with the new management team’s strategy implemented and clearly bearing fruit, new capital raised and the pipeline of new owned and franchised rooms substantially increased," said analyst Alex Paterson.

Pre-tax profit for the year to September 30 rose 38.4% to £1.09mln on revenues of £6.02mln, up 8.7% from the year before, and ahead of Investec's forecast, which was for £5.95mln.

Paterson noted that the group had a new 5-year, £12mln facility, refinancing the £7.2mln facility which was previously in place, and around £40mln of cash.

The analyst expects four new owned hotels to open in 2017, adding 372 rooms and a further 204 owned rooms in Barcelona in 2018.

"An additional 686 owned rooms are under consideration and are fully funded out of existing cash and debt capacity. 951 franchised rooms are currently under development, with at least 334 opening in FY17e including 107 rooms in Brussels which opened in October 2016."

The broker added that a new reservation system is being developed and should be implemented in the second quarter of 2017, which we anticipate will facilitate yield management. 

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