When the market closed yesterday the shares of leading accommodation provider Mantra Group Ltd (ASX: MTR) finished the day lower at $2.87, setting a new 52-week low.
This latest decline means its shares have now lost over 35% of their value in the last 12 months.
Which is all the more surprising considering Australia is currently experiencing a tourism boom and Mantra is in a strong position to profit thanks to its 20,000 rooms under management in key tourist hotspots.
So what's happened?
Although in FY 2016 Mantra delivered a 21% jump in earnings before interest, tax, depreciation, amortisation and impairment (EBITDAI), the performance of its CBD locations thoroughly underwhelmed.
Despite operating revenue from its CBD segment rising 14.4% to $311.5 million, EBITDAI in the segment tumbled 2.9% to $46 million.
Demand for its CBD rooms fell in Brisbane, Darwin and Perth following the continued contraction of mining, government, and infrastructure work in these regions. This led to the average room rate falling 1.6% to $173.36.
Whilst there are concerns that this trend could continue, management is confident that the segment will return to growth in FY 2017.
It also expects its resorts segment to continue growing. The segment was a real standout in FY 2016, posting a 48.2% increase in EBITDAI to $34.8 million. I expect another strong performance this year thanks to the tourism boom.
In November management provided full year underlying net profit after tax guidance of between $48.5 million and $52.5 million. This equates to growth of between 11% and 20% on last year's result of $43.8 million.
Are its shares a bargain buy?
Whilst I wouldn't class them as dirt cheap, I believe at 18x trailing earnings they are good value for buy and hold investors. Especially with the tailwinds of the tourism boom likely to provide solid organic growth for at least the next five years.
At this point in time I would class Mantra as a buy and would choose it ahead of Crown Resorts Ltd (ASX: CWN) and SKYCITY Entertainment Group Limited-Ord (ASX: SKC).
