The report contains a brief analysis of the Abu Dhabi listed company National Corporation for Tourism & Hotels. The first part of the report includes company profile which provides detail about NCTH such as its headquarter location, size of the firm, key competitors and many more. The second part of the report deals with the recommendations given on the financial performance and stock analysis of NCTH, illustrated with the help of graphs and calculated ratios.
Chief Financial Officer – Mr. Hany Farag
Earnings per share
|
NCTH |
|||
|
2015 |
2016 |
2017 |
|
|
Net income available for shareholders (A) |
165,524,257 |
171,633,962 |
103,881,467 |
|
number of shares (B) |
567,000,000 |
680,400,000 |
680,400,000 |
|
EPS (A/B) |
0.29 |
0.25 |
0.15 |
(Adx.ae. 2017).
Price Earnings ratio
|
NCTH |
|||
|
2015 |
2016 |
2017 |
|
|
Current value per share |
3.5 |
2.8 |
2.14 |
|
Earnings per share |
0.29 |
0.25 |
0.15 |
|
P/E ratio (A/B) |
11.99 |
11.10 |
14.02 |
(Adx.ae. 2017).
Dividend yield
|
NCTH |
|||
|
2015 |
2016 |
2017 |
|
|
Annual dividends per share |
0.25 |
0.15 |
0 |
|
Price per share |
3.5 |
2.8 |
2.14 |
|
DYR (A/B) |
7% |
5% |
0 |
(Adx.ae. 2017).
Comparing to Competitors
|
National Corporation for Tourism & Hotels |
Abu Dhabi National Hotels |
||
|
Earnings per share |
0.15 |
0.25 |
1.97 |
|
Price-earnings ratio |
14.02 |
11.21 |
26.43 |
|
Dividend Yield ratio |
0 |
4.5% |
0.77% |
The recent market price of NCTH share is AED 1.86. Graphical representation of its last two years prices is as follows:
(Adx.ae. 2018).
Comparison of ROA and ROE over past two years
Return on Assets
|
NCTH |
||
|
2016 |
2017 |
|
|
Net Income (A) |
171,633,962 |
103,881,467 |
|
Total assets (B) |
1295234065 |
1296701924 |
|
ROA (A/B) |
13% |
8% |
(Adx.ae. 2017).
Return on equity
|
NCTH |
||
|
2016 |
2017 |
|
|
Net Income (A) |
171,633,962 |
103,881,467 |
|
Shareholder’s equity (B) |
785109925 |
823361196 |
|
ROE (A/B) |
22% |
13% |
(Adx.ae. 2017).
Comparing to Competitors
|
National Corporation for Tourism & Hotels |
Abu Dhabi National Hotels |
Hyatt Hotels Corp |
|
|
Return on Equity |
13% |
2.70% |
6.70% |
|
Return on Assets |
8% |
2.35% |
3.23% |
First of all, looking at the market value ratios of the company, it can be said that NCTH earnings per share has reduced over the three years. In 2015, its EPS was 0.29 which reduces to 0.15 in 2017. This is due to reduction in the company’s net income available for shareholders while the number of shareholders outstanding remain the same for the past two years. In, NCTH’s net income was AED 177,633,962 million which reduces to AED 103,881,467 million in 2017. However, the reverse trend was noticed in the P/E ratio of the company. It rises from 11.99 to 14.02 last year due the high market price of the NCTH’s share. An increased Price earnings ratio indicates that the investors are expecting high growth in future. This is used as a benchmark to evaluate the worthiness of company’s stock. Looking at the NCTH P/E ratio, it can be said that it is worth buying the stock (Rich, Jones, Heitger, Mowen & Hansen, 2011).
The dividend yield ratio of NCTH was 5% in 2016 and is 0% in 2017. Reason being company has not declared any dividends last year due to less profits. Comparing these market ratios with NCTH’s competitors Abu Dhabi National Hotels and Hyatt Hotels Corp, it is observed that EPS, P/E ratio and Dividend yield of Hyatt hotels is much higher than its two competitors. NCTH has high P/E ratio than Abu Dhabi National Hotels but its EPS and dividend yield is lower than that. This implies that company has not performed well in the market and within the industry in which it operates (Papadopoulos, 2010).
Talking about the profitability ratios, NCTH’s ROA and the ROE both have reduced during 2017. ROA previously was reported at 13% and now it is 8%. Similarly, ROE of the company was 22% and now it is 13%. The main reason is the reduced profits and increased total assets and shareholders’ equity. When comparing the ratios to the competitors, the profitability position of NCTH is much better than its two competitors. Both the ratios of NCTH are higher than Abu Dhabi National hotels and Hyatt Hotel Corp. so it can be expected that, the profitability position of NCTH will improve in the coming years (Leach, 2010).
Lastly, NCTH’s stock price comparison with Abu Dhabi Index shows that the share price of the company has fallen over the past two years as compare to ADI. It can be seen from the graph that the market index almost remains stable and there are very less fluctuations. On the other hand major movements can be seen in the share price of NCTH. It can be said that after March 2017, the price is been continuously fallen. 16, March 2017, was the last time when it was reported at AED 3 per share and after that a constant fall is been there. On April 22, 2018 the price was AED 2.05 share which by now has also reduced to AED 1.86 per share.
Ignoring the stock prices for once, it can be said that NCTH can enjoy profitability in short and long term as compare to its competitors. Reason being, when compared it was observed that The National Corporation for Tourism and Hotels has earned more profits against its competitor, Abu Dhabi National Hotels and Hyatt Hotels Corp. This can be noticed in its profitability ratios ROA and ROE. Company has high ratios as compare to ADNH, which implies that it is in a position to make more profits by properly utilizing its assets and offer more and reasonable returns to its shareholders. However, when compare to itself, NCTH performance has got worsen in 2017, as its net profits had been reduced which declines it ROA and ROE to a great extent (Lee, Lee & Lee, 2009). Prior to 2017, the company offered 22% return on its shareholders’ equity and in 2017 the same figure turns out to be 13%. Same is the case with return on assets, in 2016 it was 13% which falls to 8% in 2017. This means the company profitability position has deteriorated over the two years. Also, if not ignoring the trends in the stock prices, it can be said that prices have shown a continuous downfall, so it may not be possible for NCTH to enjoy profitability in short and immediate term. Due to the declining profitability, share prices has also reduced. This fall majorly affect NCTH’s overall financial performance and does not positioned the company to enjoy profitability in coming years. Reason being, the share prices are been observed by many people that includes, investors, banks, partners, associates, lenders and creditors. NCTH falling prices shows that company is not performing well in the market. However, when compare to its core competitor ADNH, it is observed that it has performed better than its competitor company (Wahlen, Baginski & Bradshaw, 2014).
In general while selecting or buying a stock of a company, following factors are to be considered:
The above listed factors are usually judged while buying the stock or shares of a particular company. When looking at the stock performance of NCTH, it is observed that company’s share price has reduced over the past two years. Also its profits has been declined resulted in low ROA and ROE. Other points are also reflected from the historical data of the company. They are as follows:
Considering all the above points, it will be recommended not to buy the stock of NCTH. Reason being it has negative beta, no dividends, reduced share price, profits and EPS. Apart from the P/E ratio, all other factors indicates that investor must not buy the company’s stock as it may not give growth in future.
References
Adx.ae. (2017). Annual Report. Retrieved from https://www.adx.ae/English/News/Pages/20180215085011-NCTH.aspx
Adx.ae. (2018). MARKET HISTORY. Retrieved from https://www.adx.ae/English/Pages/Data/TradeHistory/MarketHistory.aspx
Gulfbase.com (2018). National Corp. For Tourism & Hotels – Company Overview. Retrieved from https://www.gulfbase.com/profile-summary-national-corp-for-tourism-hotels-ncth-391
Leach, R. (2010). Ratios made simple: a beginner’s guide to the key financial ratios. Great Britain: Harriman House Limited.
Lee, A. C., Lee, J. C., & Lee, C. F. (2009). Financial Analysis, Planning and Forecasting: Theory and Application Second Edition. 2nd ed. Singapore: World Scientific Publishing Company.
Ncth.com. (2018). Abu Dhabi Travel- Best Abu Dhabi Hotel Resorts- National Corporation for Tourism & Hotels. Retrieved from https://www.ncth.com/
Papadopoulos, P. (2010). Investment Report-Fundamental Analysis/Ratio Analysis. Germany: GRIN Publications.
Rich, J., Jones, J., Heitger, D. L., Mowen, M., & Hansen, D. (2011). Cornerstones of Financial and Managerial Accounting. 2nd ed. USA: Cengage Learning.
The Economic Times. (2016). Five factors to keep in mind while investing in market from here on. Retrieved from https://economictimes.indiatimes.com/markets/stocks/news/five-factors-to-keep-in-mind-while-investing-in-market-from-here-on/articleshow/51344569.cmshttps://economictimes.indiatimes.com/markets/stocks/news/five-factors-to-keep-in-mind-while-investing-in-market-from-here-on/articleshow/51344569.cms
Wahlen, J., Baginski, S., & Bradshaw, M. (2014). Financial reporting, financial statement analysis and valuation. 7th ed. USA: Nelson Education.
Zawya.com. (2018). National Corporation for Tourism & Hotels (NCT&H) – Company Details. Retrieved from https://www.zawya.com/mena/en/company/National_Corporation_for_Tourism__Hotels-718004/
Bloomberg.com. (2018). NCTH:Abu Dhabi Stock Quote – National Corp for Tourism & Hotels. Retrieved from https://www.bloomberg.com/quote/NCTH:UH
Investing.businessweek.wallst.com. (2018). NATIONAL CORP TOURISM & HOTE (NCTH:Abu Dhabi): Stock Quote & Company Profile. Retrieved from https://www.investing.businessweek.wallst.com/research/stocks/snapshot/snapshot.asp?ticker=NCTH:UH
Jenter, D., & Lewellen, K. (2015). CEO preferences and acquisitions. The Journal of Finance, 70(6), 2813-2852.
Parrino, R., Kidwell, D. S., & Bates, T. (2011). Fundamentals of corporate finance. John Wiley & Sons.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Tracy, A. (2012). Ratio analysis fundamentals: how 17 financial ratios can allow you to analyse any business on the planet. RatioAnalysis. net.
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