I finalize a week-long analysis of the select-service of the lodging and resorts REIT sector with this post on Apple Hospitality (NYSE: APLE). This may be one of the few subgroups that the market hasn’t overvalued in aggregate; select-service hotel players have been performing well operationally, and Apple Hospitality is no exception. Summit Hotel Properties (NYSE: INN), RLJ Lodging Trust (NYSE:RLJ), Chatham Lodging Trust (NYSE:CLDT) and Hersha Hospitality Trust (NYSE:HT) are also in this subgroup.
Apple Hospitality REIT has continued its efforts to boost share prices in both the stock market and operations. Formerly a non-exchange-traded REIT, the company was targeted by an activist last year; consequently, in response to an unsolicited bid offer, it applied for a listing on the New York Stock Exchange and began trading this May. While the activist’s offer has been $7.25 per share (before 50 percent reverse stock split), the initial listing price was $18. It really paid off to decline this offer and get it listed instead.
Additionally, Apple Hospitality very recently entered into a revolving credit facility and funded a tender offer of six percent of its outstanding shares at $19 per share, around which the stock has currently been trading. Other measures taken to improve APLE’s share prices have included an approval by the board of directors of a share buyback program of a significant portion of the shares and the implementation, last May, of a fifty-percent reverse stock split.
As far as operations are concerned, statistics for the first quarter of 2015 were strong. For comparable hotels, occupancy rates, average daily rates and revenue per available room advanced from 72.1 to 74 percent; approximately 5 percent (to $126.56); and 8 percent (to $93.96), respectively. Modified funds from operations increased by 40 percent, but the number of outstanding shares went up by 49 percent, causing the modified FFO per share to drop.
Other factors that case Apple Hospitality in a good light have been its valuation and its conservative debt profile. Their price-to-FFO ratio—around 13.5—has been slightly above the peer median. Dividend yield has been the highest among its peers (6.3 percent), while dividend payroll has been at 88 percent.
While Apple Hospitality has little history as a public business, it is nonetheless definitely a company to be watched.
Source: Aple Hospitality, Fast Graphs
Written by Heli Brecailo
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