Snoozebox: Next Generation Portable Hotel
Edison | Aug 26, 2014 08:10AM ET
Snoozebox Hldgs Plc (LONDON:ZZZ) has a step change opportunity with the proposed launch of its next-generation hotel product, which has the potential to transform operating performance on significantly more efficient deployment and yield management. Meanwhile, booking rates for key events are materially ahead of last year and new high-profile deployments at Glastonbury and the Ryder Cup bring welcome visibility. Stronger financial controls underpin a sharp improvement in expected H1 pre-exceptional EBITDA.
Snoozebox is confident that its next-generation portable hotel can drive an improvement in returns through much higher asset utilisation owing to a faster turnaround for events and multi-room configuration. It also expects a sharp cut in operating costs as specialist labour and equipment are not required. The pricing of market alternatives (typically, £300-600 per night for shared accommodation without en-suite facilities) is encouraging for Snoozebox’s considerably higher-quality offering. The new product will be brought to market this year, enabling deployment at many more events in 2015 and beyond. Additional funding for expansion via debt/warrants is a realistic prospect, but lies outside our forecasts.
h3 Location, location/h3Snoozebox has developed a unique, attractive lodging product, which combines the comfort of a hotel with the access of on-site location. The accommodation is portable and does not require mains services. It serves large visible markets, notably the events market (numbering over 10,000 pa in the UK alone), as well as corporate, government and international markets, and enjoys first-mover advantage with little direct competition. The model is highly cash-generative with clear scope for recurring income, both at home and abroad (with already a strong international pipeline of enquiries). Difficulties in 2013 at Snoozebox were identified as company-specific and have been addressed by strengthening financial and cost controls, enhanced product specification and marketing, efficiencies and new management.
h3 Valuation/h3Snoozebox may be compared with European-branded hotel groups (3.1x against 8.5x EV/EBITDA 2016), although with EBITDA expected to be negative in 2014e and small in 2015e, and longer-term forecasts inevitably speculative, it may be more helpful to compare Snoozebox’s EV of c £12m with our year-end 2014 forecast NAV, c £21m. Allowance for its start-up status and need for longer-term funding for expansion deserves to be more than offset by its earnings potential.
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