19/08/2017
Hotel stocks rising on improved fundamentals and positive outlook
Hotels stocks saw strong buying interest over the past week, led by a 8.5% appreciation of NMH and continued support for shares of Lux Island Resorts and Sun, up by 2.4% and 4.7% respectively over the past five trading sessions. We consider that the fundamentals for hotels are attractive on the back of improved balance sheet, healthier cash flow and positive outlook of better earnings growth. The appreciation of the EUR versus the MUR (up by 4.6% this year) and the increased air traffic to Mauritius bodes well for a strong fourth quarter (4Q2017) for the hospitality sector.
This year, Lux, which rose by 1.7%, has underperformed both NMH (+22.0%) and Sun (+19.5%). We expect the whole sector to benefit from improved investor sentiments and potentially increased foreign buying activity. We maintain our buy recommendation on all three hotel counters, while we expect Lux to benefit from an outperformance over the next months since it has lagged behind and may gain some momentum as buyers emerge.
