DAVY VIEW

Dalata has issued a trading update alongside its AGM. Group like-for-like (LFL) RevPAR was down 4% year-on-year (yoy) for the January to April period, broadly in line with our expectations and trends from the early part of the year. It notes that performance in the UK has been good and that it continues to see healthy levels of corporate demand across all regions. This has been offset by softer trading in Dublin. It reiterates that it is optimistic in its outlook for the remainder of the year. For FY24, we model broadly flat LFL RevPAR in Dublin. We expect growth to improve as we move into the seasonally more important part of the year due to the increase in scheduled flights this summer, a busy events calendar and easier comparatives from September onwards. We do not envisage any change to our forecasts on the back of this update. We retain Dalata as a top pick and see substantial share price upside as a result of: (i) strong free cash flow characteristics (FCF yield 14%); (ii) a combination of both organic and inorganic growth; (iii) its lowly geared balance sheet (bank ND/EBITDA post rent 0.9x); (iv) a modern, well-invested estate (value €1.7bn); (v) an attractive valuation (c.10x P/E); and (vi) proven operational excellence.