EVT Limited

An exposition from Dynasty Trust's latest Quarterly Report

EVT Limited is Australia’s second largest hotel room operator with nearly 16,000 rooms - though the gulf to #1 - Accor with 65,000 is a chasm. Overseas visitors to Australia are not yet back (though close) to pre COVID levels (just under 10million a year) but the domestic economy is weakening rapidly from a mix of tighter monetary policy and (in the author’s opinion) fiscal irresponsibility, which has shattered consumer confidence.

EVT is 42% controlled by the Rydge family who are conservative but are executing a smart strategy in hotels, which is far more valuable to shareholders than the country’s largest cinema exhibition chain and the optionality of a significant 4700sqm freehold CBD Sydney property site (with heritage restrictions). EVT also own a head lease on the Thredbo ski field until 2057 and have done an excellent job developing it - its a surprisingly strong free cash flow generator.

EVT shares are at the same level of 11years ago. The multi-level impact of COVID in hollowing out “B” grade CBD commercial office space in Sydney, pushing up construction costs and dissuading financiers and partners from construction activity has had an impact on the company’s ability to harvest value on its asset base.

In our view the shares have a midpoint value of over $19 before tax. The company’s history is fascinating, the family gaining control of the cinema assets in the 1940’s and adding significantly in the 1980’s and 2000’s.

It’s a private equity player’s dream. That’s very unlikely. But the family dynasty ends with the 74year old Executive Chair as he has no known dependents and is closed shop about succession. Of course, the risk is that it morphs into a nasty value trap. But in our view the hotel strategy is sensible - strategic ownership allied to management of unqiue brands across price points.

The exposition is here Dynasty Trust Quarterly Report #14