Magnificent Hotel Investments is a owner and operator of seven large hotels, one located in Shanghai and the rest in Hong Kong. Magnificent has been going through some restructuring the last year, spinning of another listed company as well as changing company name. Going forward it seems that the company will focus on the hotels in Hong Kong, already sold of one hotel i Macao.
The investing thesis for Magnificent is simple:
- The share is trading at large discount to book value (sorry, not a net-net this time).
- The company has little outstanding debt, ie financially strong given the several large properties they own.
- Clear focus in the company going forward.
The discount to book value is likely caused by the down turn in the Chinese economy and falling property prices in, particularly, Hong Kong. The last year has been though on hotels in HK as the number of mainland tourists have decreased. Given the world does not end, I think it’s likely the tourists will be back.
Entered small position at 0.174 HK$.