Ikeja Hotel Valuation Falls by 18.3% after Losses
Ikeja Hotel Plc hasn’t been in the news lately after the previous year’s internal rancour that stoked ownership battle. Definitely, the hospitality industry giant is not among the popular stocks in the equities segment of the Nigerian Exchange – lately.
The hospitality company reported it has not made a profit since 2021 – after the sector was hit hard and fast by the outbreak of covid-19 pandemic in 2020. Though, its loss moderated to N50 million last year, according to its financial statement.
When compared with the previous year, Ikeja Hotel’s loss moderated. In 2021, the company reported a more than N180 million loss after an unprecedented decline in occupancy during the pandemic.
Valued at N2.141 billion over 2.078 billion shares outstanding at a unit price of N1.03 in the stock market, Ikeja Hotel has lost about 2% from the beginning of the year to date.
Ikeja Hotel has about 40% free floats while 60.2% of the company is in the hands of six influential shareholders. Last week alone, investors discounted the stock market valuation by 18.25%, wiping off previous gain seen when the Nigerian Exchange boomed.
Data from the local bourse indicates that the hospitality industry’s player had pushed hard its market price to N1.26. Not so much is going on around the stock, but it is a red signal for a company worth less than N3 billion to lose 18.3% in a week.
Its performance record has not been impressive. The company stock isn’t among investment analysts’ coverage for obvious reasons. On Friday, deep pocket investors can start pricing Ikeja Hotel’s net asset from N2 billion.
Founded in 1972, Ikeja Hotel Plc engages in the operation of hotels and the provision of catering services. In the fourth quarter of 2022, its sales revenue declined to N8.717 billion amidst pressures in the Nigerian economy, coming from N9.868 billion reported in 2021.
The breakdown shows that there was a decline in demand for rooms, foods and beverages last year while minor operating department income fell strongly.
Even so, costs associated with room services were up but foods and beverages costs declined, indicating the possibility of reduced demand amidst growing rivalry and weak household earnings.
In line with reduced activities, costs associated with minor operating departments declined strongly. Same way, utilities and property operations & maintenance costs dropped.
Amidst microeconomic uncertainties and the industry’s rivalry with competitors, in 2022, Ikeja Hotel pushed gross profit harder than what the company achieved in 2021.
The hotel operator saw its gross earnings printed at N3.147 billion, from N2.656 billion in the comparable period. A profitability level helped by a much accelerated decline in its cost of sales when compared with revenue drop.
In 2022, costs of sales declined to N5.569 billion from N7.212 billion in the comparable period – looking like the activities level declined rather than effective cost management. Ikeja hotel’s net finance costs increased while its tax obligation in 2022 was reduced.
Based on its shareholding structure total substantial shareholders was 60.2% while directors own moderate stakes. Oma Investment Limited owns 26.2% of Ikeja Hotel shares outstanding.
The largest shareholder was followed by Wagmest Nigeria Limited with 8.7% shares holding. RFC Limited owns 7.3%, Alrum Investment Limited 5.4%, Associated Venture Limited 7.5% and Obafoluke Otudeko.
In its financial statement, Ikeja Hotel Plc indicated it achieved a free float percentage of 39.7% and a value of N792,799,954.56 as of 31 December 2022, in compliance with the Exchange’s free float requirements for companies listed on the Main Board.
