By Geoff Percival
Davy has slapped a €6.90 share price target on the Dalata Hotel Group — more than 14% higher than its current price — saying continued inbound travellers to Ireland and its expanded UK presence can drive growth up to 2020.
Last month, Dalata — Ireland’s largest hotel group via its ownership of the Clayton and Maldron chains — said its 2017 earnings, due at the end of February, should meet market expectations of somewhere between €102m and €104m.
Its share price was down by 1.15% yesterday at €6.03; but that didn’t deter Davy from upping its 12-month price target on the stock from a previous forecast of €6.20.
“We continue to like the prospects for the UK and Irish hotel sector.
We think that moderate new supply provides a supportive backdrop for RevPAR [revenue per available room] growth while good opportunities remain for both Dalata and [Premier Inn and Holiday Inn owner] Whitbread to grow their portfolio of assets using asset-light investment models,” Davy said.
“Supply dynamics in the UK and Ireland remain supportive, while the opportunity is clear for proven operators to extend their UK footprints. This bodes well for further share price appreciation,” it added.
Dalata has five UK hotels in the planning stages and a pipeline of 1,281 new rooms across Britain and Ireland opening this year and next, with the full effect likely to be seen in 2019.
However, Dalata is set to face increased competition in Ireland and the UK on the back of Swedish group Pandox and Israel’s Fattal Hotels buying Jurys Inn for €908m with an eye on expansion.