Blair Wilson
Legacy Hotels
LGY.UN-T
BUY
Jan 18, 2005
As a result of weaker sales because of weaker tourism they cut their distributions in order to maintain their operations. Now turning around. Has a sector outperform with a high risk caveat.
Have some very nice properties, but they are big properties that need very high occupancy rates to make them efficient. Its parent, Fairmont, is being taken over which puts a different valuation on this and are starting to trade closer to their net asset value. Would consider moving out.
Have great assets. Hotel industry went through a very tough period when travel was impacted by 9/11, SARS, etc. It is starting to recover but not as quick as expected. This company relies on US travellers coming to Canada but the strong Canadian$ is impacting this. Could do better in other trusts.
Dislikes the luxury hotel area. If there is a recession in the US, these things will get hit. Struggled for a number of years with their high payout distribution.
A big part of its revenue are services in the hotels so it will have a tax situation. A value investment. Low yield at the moment. Will probably be acquired. Relatively safe.
Market is expecting this to be taken out. Good assets. Sold his holdings when the price went up. It could possibly yield another $1 if you hold. Not a Buy.