Apple Hospitality: In An Effort To Boost Share Price

largest select service

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.

adjusted hotel ebitda

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.

q1 2015

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.

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Source: Aple Hospitality, Fast Graphs


Written by Heli Brecailo

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.​