Temple Hotels- new results from new properties
Temple Hotels announced it's third quarter results on November10,2014 and it showed good revenue figures but very average earnings' figures.Temple Hotels acquired six new properties in the last two quarters and four in the third quarter.This had a significant impact on it's financial results.Revenue went up from $42 million to $52 million for the third quarter and from $114 million to $138 million for nine months.Operating income barely budged ;it went from $16 million to $17 million for the third quarter and from $41 million to $44 million for 9 months.AFFO(adjusted funds from operations) increased by only 6% for 9 months and by 20% for the third quarter.The occupancy rate dropped from 73% to 69% for 9 months.Occupancy and revenue was greatly impacted(according to TPH) by major renovations at the Saskatoon Inn and by reductions in occupancy at their Fort Macmurray properties.In addition, there was a large increase in the number of outstanding shares.
Same property income
Temple (TPH) states that their continuing or "same property" income was lower than anticipated.The biggest drop came from their Fort Macmurray hotels.TPH says that the hotels at Fort Macmurray have greater profit margins so a reduction in occupancy has high impact.In fact, they state that these properties accounted for 85% of the drop in income from "same properties".The reduction they state comes from delays in major oil sands projects and competition from work camps.However the reduction in "same property" revenues was more than compensated by the newly acquired properties.Also Temple Hotels expects occupancy and room rates in Fort Macmurray to increase as oil sands production grows.
As explained,the reduction in " same property" revenue was more than offset by the new acquisitions. As the acquisition room revenue now makes up 50 % of total room revenue.So consequently operating income registered a $3 million increase. Also a big customer(the Keg Steakhouse) increased their 15 year lease by 7000 square feet to 12,000 square feet in one of their Fort Mcmurray hotels.
Cash flow and AFFO
Temple Hotels shows that cash flow increased from $11 million for 9 months of 2013 to $18 million for 9 months of 2014.Also they show that cash flow went from $4 million in 2013 to $8 million for this quarter.But AFFO dropped slightly.This is because of non-cash items such as their $3.3 million depreciation charge.AFFO should only be used as a measure of performance if the non-cash items remain stable.In this quarter the non-cash items were a larger share of cash flow and so AFFO is not a great measure.Also TPH increased their number of common shares by 40%.So AFFO per share is not comparable either. That aside AFFO per share was $.56 for 9 months (in 2013) and about $.25 for the last quarter of 2013;so AFFO per share for 2013 was about $.80 and the price/earnings for most of 2013 was from 8 to 8.5.In 2014 AFFO was $.37 per share for 9 months and should be about $.15 for the last quarter;so AFFO for 2014 will be about $.53 to $.55 per share.So price /earnings for 2014 and early 2015 should be about 8.5 to 9.
In conclusion,TPH had a few operational growing pains including having a large new equity issue.But cash flow is up substantially from 2013 and occupancy will likely climb a bit at Fort Macmurray in the winter.The Saskatoon Inn will be finished renovations. So look for cash flow to continue increasing slightly in Q4.If it does TPH shares should head back up to the$ 4.75 to$ 5.25 per share area.
Same property income
Temple (TPH) states that their continuing or "same property" income was lower than anticipated.The biggest drop came from their Fort Macmurray hotels.TPH says that the hotels at Fort Macmurray have greater profit margins so a reduction in occupancy has high impact.In fact, they state that these properties accounted for 85% of the drop in income from "same properties".The reduction they state comes from delays in major oil sands projects and competition from work camps.However the reduction in "same property" revenues was more than compensated by the newly acquired properties.Also Temple Hotels expects occupancy and room rates in Fort Macmurray to increase as oil sands production grows.
As explained,the reduction in " same property" revenue was more than offset by the new acquisitions. As the acquisition room revenue now makes up 50 % of total room revenue.So consequently operating income registered a $3 million increase. Also a big customer(the Keg Steakhouse) increased their 15 year lease by 7000 square feet to 12,000 square feet in one of their Fort Mcmurray hotels.
Cash flow and AFFO
Temple Hotels shows that cash flow increased from $11 million for 9 months of 2013 to $18 million for 9 months of 2014.Also they show that cash flow went from $4 million in 2013 to $8 million for this quarter.But AFFO dropped slightly.This is because of non-cash items such as their $3.3 million depreciation charge.AFFO should only be used as a measure of performance if the non-cash items remain stable.In this quarter the non-cash items were a larger share of cash flow and so AFFO is not a great measure.Also TPH increased their number of common shares by 40%.So AFFO per share is not comparable either. That aside AFFO per share was $.56 for 9 months (in 2013) and about $.25 for the last quarter of 2013;so AFFO per share for 2013 was about $.80 and the price/earnings for most of 2013 was from 8 to 8.5.In 2014 AFFO was $.37 per share for 9 months and should be about $.15 for the last quarter;so AFFO for 2014 will be about $.53 to $.55 per share.So price /earnings for 2014 and early 2015 should be about 8.5 to 9.
In conclusion,TPH had a few operational growing pains including having a large new equity issue.But cash flow is up substantially from 2013 and occupancy will likely climb a bit at Fort Macmurray in the winter.The Saskatoon Inn will be finished renovations. So look for cash flow to continue increasing slightly in Q4.If it does TPH shares should head back up to the$ 4.75 to$ 5.25 per share area.
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