Key factors underpinning our positive view on AHD include:
1. Higher Return on Assets (ROA) in Hotels division, supported by performance of QT Hotels, notably QT Sydney, and improvement in the profitability of Rydges, with management stripping out costs.
2. Strong operating cashflows, coupled with an excellent strong balance sheet have enabled the Company to undertake both maintenance and expansive CAPEX, maintain a dividend payout ratio of 60-80% and still generate positive net free cashflows.
3. Conservatively managed, with negligible net debt.
4. Defensive earnings profile in the event of a downturn in economic conditions
5. Attractive trading multiples in comparison to peers
AHD looks as though it broke out of a continuation pattern in February this year and is therefore on course to continue heading higher. It appears to have hit some short term resistance though, so we may see it pull back in the short term. We have some very strong support at $8.50 but it may not get that low. Once it gets going again, there is a possibility of the current rally extending up towards $10, based on the size of the movements leading up to this point.