Stock Watch - Stock picks — City Lodge Hotels and Remgro
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Jean Pierre Verster from Protea Capital Management chose City Lodge Hotels as his stock pick of the day and Graeme Körner from Körner Perspective chose Remgro
Verster said: "I've been going offshore for the last 4-5 years but I'm coming back home and I'm picking City Lodge. The share price has been decimated down 75% the last 2 years, we know occupancy are quite low at the moment. The founder of the group has passed away so there has been a large volume on the market and a lot of shares coming on sale on the market. It could be his estate being selling, it could be the BEE deal that had some bank finance against it, it might be recall. It's interesting to see at these low levels there's proper volumes so liquidity isn't an issue and you can buy City Lodge shares if you want them. I do think the low occupancy rates have been impacted by other hotels being built including section 12J schemes where a lot of people have put their money in the types of companies that develope and manage other hotels that have come on-stream. So there are to many rooms out there but I think over time that will normalise and the City Lodge brand is strong enough that they will pick up occupancies and hopefully get back to a normal earnings profile.
Körner said: "I'm gonna go with Remgro. If you look at some of the underlying portfolio companies it comes back to a SA Inc type of company. Obviously MediClinic is very much an international play but we've got the unbundling of RMB and the collapse of the RMB structure into FirstRand that will unlock some value. But then you have got businesses like Distell and RCL good underlying SA kind of focused businesses. Although many of them have try to pivot, often expensively, into the rest of the world but you it's gone from almost R200 to R169. The discount is widening and can see by the decision to unbundle FirstRand that there's a clear strategy to narrow the discount and to return value to shareholders. It's a coward's choice but I think you're
Verster said: "I've been going offshore for the last 4-5 years but I'm coming back home and I'm picking City Lodge. The share price has been decimated down 75% the last 2 years, we know occupancy are quite low at the moment. The founder of the group has passed away so there has been a large volume on the market and a lot of shares coming on sale on the market. It could be his estate being selling, it could be the BEE deal that had some bank finance against it, it might be recall. It's interesting to see at these low levels there's proper volumes so liquidity isn't an issue and you can buy City Lodge shares if you want them. I do think the low occupancy rates have been impacted by other hotels being built including section 12J schemes where a lot of people have put their money in the types of companies that develope and manage other hotels that have come on-stream. So there are to many rooms out there but I think over time that will normalise and the City Lodge brand is strong enough that they will pick up occupancies and hopefully get back to a normal earnings profile.
Körner said: "I'm gonna go with Remgro. If you look at some of the underlying portfolio companies it comes back to a SA Inc type of company. Obviously MediClinic is very much an international play but we've got the unbundling of RMB and the collapse of the RMB structure into FirstRand that will unlock some value. But then you have got businesses like Distell and RCL good underlying SA kind of focused businesses. Although many of them have try to pivot, often expensively, into the rest of the world but you it's gone from almost R200 to R169. The discount is widening and can see by the decision to unbundle FirstRand that there's a clear strategy to narrow the discount and to return value to shareholders. It's a coward's choice but I think you're