IS MANTRA GROUP IN THE SIGHTS OF ASIAN INVESTORS?

IS MANTRA GROUP IN THE SIGHTS OF ASIAN INVESTORS?

Mantra Group (ASX:MTR) is rumoured to be a takeover target, with Asian investors and the InterContinental Hotel Group linked to the Gold Coast based hotel group.

The Australian is reporting that the speculation is taking place as major international hotel operators search for growth opportunities in Australia.

Mantra is considered a prime target with its recent aggressive expansion which now means it operates 127 properties under the Mantra, Peppers and BreakFree brands with more than 20,000 rooms under management.

The company posted a 15.1 per cent increase in net profit after tax to $31.8 million for the year to December 2016. Revenue rose 15.9 per cent to $356.2 million while earnings before interest and tax (EBIT) was up 9.3 per cent to $46.7 million.

The recent addition of new properties at the 1,176 room Ala Moana Hotel in Honolulu, Mantra Residences @ Southport Central on the Gold Coast and Mantra The Observatory at Port Macquarie helped drive organic growth in both domestic and international visitors.

Despite the strong results, its market value has declined around 40 percent over the past year and the lower Australian dollar means Mantra probably looks like a good value acquisition for overseas investors.

Citi travel and leisure analyst Sam Teeger also regards Mantra as a potential takeover target because of increased demand in long haul travel from China to Australia.

"We see the potential for demand from Asian hotel owners and operators for international hotel assets to increase, driven by Chinese travellers switching to long haul destinations," Teeger says.

"This trend is evident from the acquisition of the Hilton Melbourne South Wharf hotel by Singapore-based UOL Group for $230 million and Anbang's unsuccessful bid for Starwood.

"We expect Mantra to benefit more than Event Hospitality and Entertainment (owners of Rydges) given the former's share register is more open."

MTR shares were trading at $2.685 at 12.20pm (AEST), a rise of just one and a half per cent.

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