Mantra Group

About the author:

Belinda Moore
Author name:
By Belinda Moore
Job title:
Senior Analyst
Date posted:
17 July 2014, 9:12 AM
Sectors Covered:
Agriculture, Food & Beverage, Travel and Chemicals

Mantra Group (MTR) is an accommodation operator in Australia and New Zealand. It is also expanding in Indonesia. We are attracted to the quality of the business, its diversified portfolio, attractive industry fundamentals, growth opportunities and free cash flow.

A leading Australian accommodation operator

MTR's portfolio consists of 113 properties and over 11,600 rooms in hotels, resorts and serviced apartments in Australia, New Zealand and Indonesia. MTR has the second largest network of properties in Australia, attracting approximately 2 million guests per annum. The portfolio is well located and is diversified across different geographies and sectors (corporate and leisure).

The company operates three well-known brands: Peppers (luxury); Mantra (premium); and Breakfree (affordable). MTR manages its properties under a range of operating structures, the two key being Leases and Managment Letting Rights. 

In recent years, MTR has invested in a sophisticated distribution and booking system.

Growth prospects and strong cashflow

MTR generates its income through the sale of accommodation and related services. The company is leveraged to improving domestic leisure and business travel demand through its Resorts and CBD businesses. It is also benefiting from strong international inbound travel to Australia, led by Asia. 

With a recapitalised balance sheet and plenty of property acquisition opportunities being presented to it, MTR is well positioned to grow its portfolio over coming years. Through both organic and acquisitive growth, MTR should grow double digit earnings for at least the next few years. MTR's acquisition strategy is highly accretive, with a 20% EBITDA return target. The company generates strong cashflow and has limited capex requirements given it is an operator and not an owner of its properties.

Initiating coverage

We expect MTR will re-rate toward our valuation as it delivers on its forecasts and makes accretive acquisitions. 

Mantra Group offers investors a solid earnings growth profile and an attractive fully franked dividend yield. The company is led by a solid management team with a proven track record. We initiate coverage with an Add recommendation with a share price target of A$2.07.

More information

Morgans clients can access our detailed research on Mantra Group (MTR). If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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