Redcape shares bounce after earnings upgrade
Shares in Redcape Hotel Group surged to a six-month high on Thursday after the gaming pub owner and operator upgraded both its full-year earnings guidance and distribution payout following improved trading across its NSW-centric portfolio.
The Moelis Australia-backed group, which owns venues such as Minsky’s in Cremorne and the Eastwood Hotel in Ryde, lifted its full-year underlying earnings forecast to 10.2¢ per share, a 5 per cent rise on guidance of 9.7¢ per provided in February.
Shareholders will benefit from the improved performance after Redcape increased its fourth-quarter distribution to 2.67¢ from a previously guided 1.83¢. The full-year distribution increased 11.5 per cent to 8.16¢.
Redcape, which generates almost two-thirds of its revenue from gaming, reinstated its quarterly distributions in the September 2020 quarter, after they were temporarily suspended when it was forced to shut its venues in last year’s nationwide lockdown.
On a day when the share market retreated Redcape shares rose 4.1 percent, or 4¢, to close at a six-month high of $1.02.
Chief executive Dan Brady told The Australian Financial Review most of the earnings upgrade was driven by improved trading following the easing of restrictions and the rise of “localism” as people engage with their local venues and communities.
He added that Redcape’s Publinc loyalty program, which was launched in November, had been highly successful.
Members earn points when they eat, drink or gamble at Redcape venues, which can be redeemed for discounts or donated to local community initiatives.
“We’ve donated $300,000 to 60-odd groups and hope to push that out to $1 million this year,” Mr Brady said.
The earnings upgrade comes amid heady activity in the pub real estate sector. According to HTL Property, a record $1.3 billion-plus of pubs are expected to change hands this financial year.
Redcape has itself been an active buyer of assets, acquiring two Greater Western Sydney venues, the O’Donoghue’s Hotel at Emu Plains and The Gladstone Hotel at Dulwich Hill and two Brisbane pubs – the Aspley and Shafston hotels – last November and December.
Redcape settled the two Sydney pubs earlier this year. The Brisbane pubs are due to settle next week, taking its portfolio to 36 venues worth more than $1.2 billion.
Mr Brady said Redcape had the balance sheet capacity to continue to grow through “discerning acquisitions” where it can add value.
He acknowledged there was a lack of offerings in the market. “A lot of owners are holding on.”
“We took advantage during COVID to pick up long-held assets,” Mr Brady said.
